Inflation rises to 3.2% in July

MANILA, Philippines - Inflation quickened to a six-month high of 3.2 percent in July on the back of higher electricity and water prices, the National Statistics Office (NSO) reported yesterday.

The Bangko Sentral ng Pilipinas (BSP) said it will be watchful of developments as analysts said inflation could rise in the coming months due to supply chain disruptions caused by the recent calamity.

Consumer prices rose by an average of 3.2 percent in July from 2.8 percent the previous month. This is the fastest pace since the four-percent pace recorded in January. The latest figure also fell at the higher end of the BSP’s 2.6-to 3.5-percent forecast for the month.

Still, year-to-date inflation averaged 3.1 percent, within the lower end of BSP’s three-to five-percent target for the year.

 “While there was an uptick from the previous month, (inflation) rate remains close to the lower end of the target range for 2012. Nevertheless, this bears watching to see the duration and extent of the (upward movement),” BSP Governor Amando Tetangco Jr. said in a text message to reporters.

 “The over-all assessment of manageable inflation continues. BSP will continue monitoring the price situation to determine the implications for the monetary policy stance,” he added.

NSO said faster annual gains were recorded in seven commodity groups, offsetting slower increments in clothing and footwear, health, transport and education indices.

The increase was led by the housing, water, electricity, gas and other fuels group, whose average price rose five percent in July from the revised 4.1 percent in June. This was due to rate hikes implemented by Manila Electric Co., Maynilad and Manila Water last month.

Prices of food and non-alcoholic beverages increased to 2.3 percent, while that of tobacco and alcoholic beverages inched up to 4.9 percent during the same period, data showed. NSO said these were slightly faster than June’s 2.1 percent and 4.8 percent, respectively.

 “Excluding food and energy items, core inflation rose to 4.1 percent in July from 3.7 percent in June,” NSO said.

Barclays Capital, in a note, said consumer prices could spike in the coming months because of higher food prices “given recent weather disruptions.”

Bank of the Philippine Islands economist Jun Neri said higher inflation as a result of a calamity is “possible” but could be “transitory and is not likely to persist.”

Still inflation could settle at 3.1 percent this year as the BSP forecasted, Barclays said.

 “With the global growth environment remaining challenging, the BSP’s continued discomfort with peso strength and fairly contained inflation expectations, we maintain our view that the central bank will cut rates again by 25 (basis points),” it explained.

In its last policy meeting on July 26, BSP cut rates to new record-lows of 3.75 percent and 5.75 percent for overnight borrowing and lending, respectively.