Inflation seen at 1.5% in December

MANILA, Philippines - Holiday demand could have pushed up consumer prices further in December, the chief economist of the Department of Finance said, ahead of the inflation report today.

Inflation, as measured by consumer price index (CPI), could have reached 1.5 percent in December, faster than November’s 1.1 percent, but still slower than the 2.7 percent in the same period in 2014.

“Inflation is normalizing from the dampening impact of oil prices,” Finance Undersecretary Gil Beltran said yesterday.

According to Beltran’s estimates, the sub-indices of food and non-alcoholic beverages, alcoholic beverages and tobacco, and recreation and culture likely contributed the most to faster inflation last month.

The three collectively account for nearly 43 percent of the CPI basket of goods and services.

“Food is adversely affected by Typhoon Lando and holiday-related demand upsurge, transport by lagged effect of fuel prices and alcoholic beverages, recreation and culture due to holiday demand,” Beltran said.

Lando battered Northern Luzon in September, causing supply disruptions on food and other products being delivered to Metro Manila. Lower supply or higher demand because of the holiday season result into higher prices.

“The recovery of food supply is very important after a strong typhoon,” Beltran said.

Food prices could have risen by two percent, faster than November’s 1.1 percent, while those of alcoholic beverages and tobacco likely increased 4.6 percent from 3.9 percent.

Prices under recreation and culture, on the other hand, may have gone up 1.2 percent from one percent in the same period.

Aside from the three sub-indices, those of clothing and footwear as well as health could have posted percentage-point increases to 2.4 percent and 1.9 percent, respectively.

Inflation last year had continuously decelerated since peaking last February and has averaged 1.4 percent for the first 11 months. The government has set a two- to four percent inflation target for 2015 and 2016.

Tumbling crude in the world market that translated to lower oil prices helped kept inflation in check last year. According to Beltran, average diesel price as of December went down to P25.24 per liter from P25.59 a month ago.  

Slowing inflation had allowed the Bangko Sentral ng Pilipinas to keep interest rates steady last year. The BSP’s policy rates currently stand at four percent and six percent for overnight borrowing and lending, respectively.

Low interest rates mean consumers and investors can borrow cheap from banks to finance their consumption and investment activities.