But PSA notes slower rice inflation

MANILA (UPDATE 4) - Inflation quickened to 4.4 percent in July as power, fuel and food costs increased, the Philippine Statistics Authority reported on Tuesday. 

This was the fastest clip in the year and was also above the government's 2 to 4 percent inflation target range. Inflation had already slowed to 3.7 percent in June from the previous 2024 high of 3.9 percent in May. The July rate however, was within the Bangko Sentral ng Pilipinas' forecast of 4 to 4.8 percent inflation for the month.

National Statistician and PSA Undersecretary Dennis Mapa said power rate hikes had one of the biggest impacts on the inflation rate. 

"Yung sa power, we expected that kasi nag-adjust yung Meralco rates di ba nung July. So talagang doon tayo may malaki ang contribution sa inflation," Mapa said. 

(On power, we expected that because Meralco adjusted rates in July. So that really had a big contribution to inflation.)

Other contributing factors were the fuel price hikes last month, particularly diesel, gasoline and LPG, Mapa said.  

The PSA said the faster yearly growth rate of the heavily-weighted food and non-alcoholic beverages index at 6.4 percent in July 2024 from 6.1 percent in June 2024 also contributed to the uptrend of the overall inflation.

"Food inflation at the national level rose to 6.5 percent in June 2024 from 6.1 percent in May 2024. In June 2023, food inflation was higher at 6.7 percent," the PSA said.

Higher inflation rates were also noted in education services.

SLOWER RICE INFLATION

Rice inflation meanwhile slowed down, and the PSA even recorded a month-on-month reduction in prices, Mapa said. Mapa said the price of regular milled rice was P50.90nper kilo on average in July, which was lower than the P51.10 price in June, or a reduction of 0.3 percent.

Price cuts were also noted in well milled rice which went down to P55.85 in July from P55.96 in June, and special rice which went down to P64.42 last month from P64.56 in June. 

"So may pagbaba sya, pero di ganun kalaki," Mapa said.

(So there was a decrease but no that much.)

The PSA noted that rice inflation slowed to 20.9 percent in July from 22.5 percent in June. Mapa also said they expect a "substantial" slowdown in rice inflation in August due to "base effects" as rice prices had started increasing sharply in August last year.

"In terms of the price of rice or rice inflation, which is contributing substantially dito sa overall inflation, posible tayong may base effect na mag-slowdown yung rice inflation nitong August."

Another factor that may contribute to slower rice inflation, or even a decrease in rice prices is the reduction of the tariff for rice imports.

“Yung reduction sa tariff ay magsisimula nang bumababa. May posibleng substantial  reduce sa presyo ng bigas this August,” he said.

(Reduction of rice tariff has started. There is a possibility of a substantial reduction in prices this August.)

Nomura's Chief Asean Economy Euben Paracuelles said he also expects inflation to slow in August as the rice tariff cuts take effect. 

"I think what we haven’t seen in print is impact of reduction of import tariff on rice I expected that to start materializing in the August print. So should show up this month," Nomura said in an interview with ANC. 

Paracuelles said he expects inflation to slide further starting August until it hits 2 percent, or even lower, by the end of the year, giving the central bank room to cut rates.

Mapa meanwhile said they expect the recent weather disturbances to also have an impact on the prices of commodities, particularly vegetables and other food products, in August.

SLOWER CORE, BUT QUICKER FOR POOREST FAMILIES

Core inflation, which strips out food and energy items that are prone to big swings, slowed down to 2.9 percent in July 2024 from 3.1 percent in the previous month, the PSA said. In July 2023, core inflation was higher at 6.7 percent. 

The inflation rate for the poorest families, or the bottom 30 percent of the population, meanwhile was also quicker at 5.8 percent. Inflation for the poorest was at 5.5 percent in June this year, and 5.2 percent in July last year.

BSP SEES INFLATION SLOWDOWN STARTING AUGUST

The BSP said it expected inflation to "temporarily settle above the target range in July 2024 due mainly to higher electricity rates and positive base effects." 

But starting in August, the BSP said it expects inflation to start slowing down. It said the balance of risks to the inflation outlook has shifted to the downside for 2024 and 2025 due largely to lower import tariffs on rice. 

"Nonetheless, higher prices of  food items  other than rice, as well as higher transport and electricity charges continue to pose upside risks to inflation," the BSP said in a statement.

The National Economic and Development Authority (NEDA) meanwhile said the government is working to support the most vulnerable sectors and ensure food security amid the ongoing La Niña phenomenon and the higher inflation recorded in July.

“The government is relentlessly working to address our nation’s most pressing concern of ensuring food security for every Filipino amid the faster rise in prices in July and the expected typhoons and rains due to the onset of La Niña this August,” NEDA Secretary Arsenio Balisacan said.

He said the Department of Agriculture has assured the availability of the quick response fund, assistance, credit, and seed buffer stock for farmers. The DA will also provide around P510 million in fuel subsidies to crop, livestock, and poultry farmers, NEDA said. 

Balisacan also noted that despite the high inflation "about 2.5 million Filipinos were lifted out of poverty" between 2023 and 2021 "bringing our country’s poverty incidence down to 15.5 percent from 18.1 percent."

Nomura has adjusted its call on the BSP, now seeing three 25-bps cuts this year, and another 75-basis point cut total for next year.

The BSP has been keeping monetary policy tight, maintaining its benchmark rate at 6.5 percent for almost a year now, in a bid to curb inflation. While the central bank has kept interest rates steady in its June meeting, BSP Governor Eli Remolona has hinted at a possible rate cut ahead of a similar move expected from the US Federal Reserve.

The BSP's next monetary policy-setting meeting is on Aug. 25.

- With a report from Jekki Pascual, ABS-CBN News