Inflation surprises with milder uptick in September

Published by rudy Date posted on October 5, 2021

by Ramon Royandoyan –, 5 Oct 2021

MANILA, Philippines (Update 1, 12:14 p.m.) — Consumer price growth eased in September, beating expectations of a faster climb and supporting the central bank’s decision to keep its easy money policy as the pandemic drags on.

Inflation, as measured by the consumer price index, went up 4.8% year-on-year in September, a softer uptick than 4.9% recorded in August, the Philippine Statistics Authority reported Tuesday.

The latest reading matched the low-end of the Bangko Sentral ng Pilipinas’ forecast range for the month, which already raised the possibility of inflation hitting as high as 5.6% in September. Meanwhile, analysts polled by BusinessWorld had expected inflation to reach 5% in September.

National Statistician Claire Dennis Mapa attributed the milder inflation print to slower increase in public transport prices which, he said, was distorted by high base effects from last year when lockdowns pushed up jeepney and tricycle fares due to tight supply at the time. In September, transport costs went up 5.2% on-year, slower than 7.2% in the previous month.

Some food items were also more affordable last month. Data showed price increases of food and non-alcoholic beverages moderated to 6.2% in September, from 6.5% in August. Dissecting this segment, prices of fish especially tilapia posted slower increment, as well as chicken and fruits like banana. However, pork, galunggong and vegetables posted faster price hikes.

“Food costs improved somewhat as supply side bottlenecks eased, helping to push down vegetable and meat prices,” Nicholas Mapa, senior economist at ING Bank in Manila, said.

As it stands, consumer prices are still elevated. From January to September, inflation averaged 4.5%, settling above the BSP’s 2-4% annual target.

Nevertheless, the fresh reading was encouraging for policymakers hoping to see signs that price gains are easing so they can keep providing support to the pandemic-hit economy. BSP Governor Benjamin Diokno, who met last month with the Monetary Board to keep the policy rate at record-low 2%, said the price increases were mainly due to supply issues that do not require an action from the central bank.

“These supply side shocks are best addressed by timely non-monetary policy interventions that could ease domestic supply constraints. The return of inflation to the target range is highly contingent on the successful implementation of these supply measures,” Diokno said.

Moving forward, Sanjay Mathur, Southeast Asia economist at ANZ Bank, expects lower food prices to temper inflation in the coming months.

“We do expect inflation to progressively moderate in the coming months. While oil prices have indeed, surged again, we think that they will be offset by lower food prices,” Mathur said in an e-mail exchange.

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