July inflation accelerates to 2.7 percent, fastest in 6 months

MANILA (UPDATE) - Inflation quickened in July based on government data released on Wednesday, its fastest pace in 6 months due to rising transport costs.

The consumer price index rose 2.7 percent in July, within the Bangko Sentral ng Pilipinas' estimated range of 2.2 to 3 percent, and between 2.2 to 2.8 percent based on a Reuters poll of 13 economists.

Core inflation, which strips out volatile food and fuel items, was at 3.3 percent. 

"Ito ay sanhi ng mabilis na pagtaas ng presyo ng pamasahe sa tricycle na nagtala ng 33.9 percent inflation nitong Hulyo 2020 mula sa 26.8 percent noong Hunyo 2020," said National Statistician Usec. Claire Dennis Mapa.

(The higher inflation was due to higher tricycle fares which registered a 33.9 percent inflation rate in July from 26.8 percent in June.)

Transport inflation reached 6.3 percent for the month, from a negative in March, April and May. 

"The BSP forecast inflation to average 2.3 percent this year and 2.6 percent in 2021," ING Philippines senior economist Nicholas Mapa told ANC.

"I think the higher but still benign inflation print is a reflection of a weaker economic activity in the Philippines right now," Mapa said.

"The things that saw a rise in price pressures, basic commodities, transport prices going up because you can no longer share a ride, you have to take a ride by yourself…as long as the virus is out there, we’ll probably be seeing this trend going forward," he added.

• July inflation likely within 2.2 to 3 percent range: BSP think tank
• Inflation quickens to 2.5 percent in June as gov't loosens virus lockdowns

Metro Manila, Cavite, Rizal, Bulacan and Laguna were placed back under modified enhanced community quarantine from Aug. 4 to Aug. 18 to give the healthcare system "breathing space" as cases surged.

Under MECQ, more businesses would have to close again, including gyms, internet shops and salons, while dine-in were again suspended to contain the spread of COVID-19. 

BSP Governor Benjamin Diokno earlier said reverting back to MECQ has "limited impact" on the economy.

• Modified ECQ shift has 'limited economic impact': BSP Gov. Diokno

Second quarter economic growth will be released Thursday, Aug. 6. Diokno earlier said the second quarter would be the worse and that the third quarter would likely be better, before the MECQ reversion was announced.

The BSP cut key interest rates by 175 basis points this year, bringing the benchmark to a record low of 2.25 percent. Diokno said the BSP has room for more policy actions if needed to support the economy.