Private economists issue mixed inflation forecasts for 2011, 2012

PRIVATE sector economists have mixed inflation trends for 2011 and next year, but are still within the target ranges of the government for both years, a survey conducted by the Bangko Sentral ng Pilipinas showed.

Based on the results of the central bank’s survey of private economists for September, inflation is expected to be within the 3 to 5 percent target range for both 2011 and 2012.

The mean inflation forecast for 2011 eased to 4.5 percent in the third quarter compared with 4.7 percent in the previous quarter. The mean inflation forecast for 2012 remained at 4.3 percent.

“Analysts noted that the recent easing of global commodity prices as well as expectations of slower global economic growth due to the euro zone’s continuing debt crisis, coupled with the weak US economy, would dampen inflationary pressures going forward,” BSP Deputy Governor Diwa Guinigundo said.

Based on the probability distribution on the forecasts provided by 10 out of the 13 respondents, there was a 73.3 percent chance that average inflation for 2011 could settle within the 4.1 to 5 percent range, or still within the central bank’s target range for the year, Guinigundo said.

Respondent banks include Asia ING, ATR KimEng, Banco de Oro, Bank of China, Bank of Commerce, Deutsche Bank, Forecastweb, HSBC, Metrobank, Multinational Investment Bancorporation, Nomura, Rizal Commercial Banking Corp., and UBS.

Nomura gave the highest inflation forecast for the fourth quarter at 5.10, as well as for the full year at 4.90 percent.

Guinigundo said the private sector’s’ sentiment was consistent with the business expectation survey for the third quarter, as it showed a smaller majority of respondents expecting inflation to move up from a diffusion index of 38.7 percent to 32.1 percent as well as in the fourth quarter from 34.8 percent to 29.2 percent.

“This reflects, in part, the moderating global commodity prices,” Guinigundo said.

Likewise, results of the consumer expectation survey for Q3 2011 showed that respondents expect inflation to drop to 8.5 percent in the next 12 months from 10.4 percent in the second quarter.

Respondents expect lower inflation for transportation (from 17.6 percent to 14.0 percent); fuel (from 10.9 percent to 7.4 percent); education (from 11.5 percent to 8.6 percent); house rent (from 8.2 percent to 5.7 percent); and fruits and vegetables (from 15.2 percent to 12.8 percent).

Using the diffusion index, the survey showed a smaller majority of respondents expecting increases in the prices of goods and services over the next 12 months from 56.9 percent in the second quarter to 48.7 percent in the third quarter.

“Compared to the previous quarter, the downward adjustment in the forecast path in Q3 2011 may be attributed to the lower-than-projected inflation outturns from June to September, easing of global oil prices, lower domestic output expansion and slower domestic liquidity growth,” Guinigundo said.

He said the slower money demand growth reflected the impact of recent policy actions by the BSP, including the two-percentage points increase in reserve requirements, to curb potential inflation pressures.

Consumer prices rose to a four-month high in October to 5.2 percent from September’s 4.8 percent based on 2006 prices, because of higher food, housing and utilities’ prices as a result of the typhoons that struck the country.

Guinigundo said the peak of monthly movements in consumer prices might have been reached last month. –Lailany P. Gomez Reporter, Manila Times