Inflation quickens for 6th straight month, smashes forecasts

ABS-CBN News

Posted at Jul 05 2018 09:22 AM | Updated as of Apr 24 2019 05:27 PM

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MANILA -- (UPDATE) Inflation accelerated for the sixth straight month in June, smashing forecasts at 5.2 percent, official data released Thursday showed.

This was due mainly to the 6.1-percent increase in prices of food and non-alcoholic drinks, the Philippine Statistics Authority said. Prices of alcoholic drinks, tobacco, water, electricity and fuel also rose.

A Reuters poll of economists predicted a 4.8-percent increase. The top end of the Bangko Sentral ng Pilipinas' forecast was 5.1 percent, while the Department of Finance placed it at 4.9 percent.

The rise in consumer prices was the fastest since at least January 2013. It was also the fourth straight month that inflation breached the top end of the BSP's 2 to 4 percent target for the full year.

Using 2012 as the base year (orange line), inflation rose for the sixth straight month, accelerating to 5.2 percent in June 2018. With 2006 as the reference year (blue line), inflation was at 5.7 percent, its highest level since March 2009. Edson Guido, ABS-CBN Data Analytics Team

SHRINKING GOODS

Higher prices may result to "shrinkflation," wherein manufacturers decrease the size of their goods to keep prices the same, according to an analysis by Ateneo School of Government Dean Ronald Mendoza and economist Ayn Torres.

The minimum wage needs to be increased by 26 to 35 percent for a family to afford the government-prescribed under the "Pinggang Pinoy" program, according to Mendoza and Torres.

President Rodrigo Duterte can also bring down prices of well-milled rice by P8 per kilo or 20 percent if the government shifts to tariffs on the staple grain from import quotas, they said.

"It is critical that our policymakers focus on addressing the root causes of inflation on the supply side; and rice plays a key part in the inflation story," they said.

Inflation was highest in ARMM at 7.7 percent (darkest red), while it was lowest in Central Luzon at 3.0 percent (light yellow area). For NCR, inflation quickened to 5.8 percent compared to 4.9 percent in May. Edson Guido, ABS-CBN Data Analytics Team

INTEREST RATES RISING

Analysts said faster inflation would put pressure on the BSP to raise interest rates for a third time this year, after the total 50-basis point hikes since May.

"The higher-than-expected June inflation outcome is a setback. We will review and update our situational assessment and forecast inflation path," BSP Governor Nestor Espenilla said in a statement.

"This will shape the strength and timing of our next monetary policy response to firmly anchor inflation expectations. The BSP reaffirms its strong commitment to ensure that inflation returns to within the 2-4 percent target range as soon as possible," he said.

The Monetary Board will meet for the fifth time this year on Aug. 9.

The Philippine Stock Exchange Index snapped a 4-day winning streak after the inflation data was released. It was down 1.23 percent in early trading.

The peso opened weaker against the dollar at P53.41 from P53.36 on Wednesday.