MANILA, Philippines — Economists are at odds over the inflation figures for July, with some expecting further pickup and others seeing a slowdown in the pace of consumer price growth.
Alvin Arogo, economist at Philippine National Bank, said inflation likely accelerated further to 6.7 percent in July after quickening to 6.1 percent in June from 5.4 percent in May.
“We forecast a meaningful increase in the pace of inflation to an average of eight percent in the second half. We see that global commodity prices that immediately impact inflation, such as oil, coal and wheat will continue to remain elevated,” Arogo said.
He said another matter of concern is the lagged effect of the spike in the cost of fertilizers on overall food prices.
“We also believe that the second-round effects will likely be more pronounced during the rest of the year due to the recent increase in the country’s minimum wage,” Arogo said.
Unionbank chief economist Ruben Carlo Asuncion said inflation likely peaked at 6.6 percent in July.
“Our forecast models point to a still elevated inflation in the second half with an average of slightly above five percent,” Asuncion said.
The Aboitiz-led bank sees inflation averaging 5.1 percent for this year and 4.6 percent for next year, both exceeding the two to four percent target set by the Bangko Sentral ng Pilipinas.
ING Bank senior economist Nicholas Mapa said inflation likely accelerated to 6.2 percent in July after quickening to 6.1 percent in June from 5.4 percent in May.
Mapa sees inflation peaking at 6.8 percent in October as second round effects are just kicking in after wage and transport adjustments.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said inflation likely settled at 6.1 percent in July due to the delayed effects of the wage hikes, the transport fare hikes and other increases in the prices of other affected goods and services in the economy.
“Mathematically, barring any new shocks, the peak for headline inflation could be reached at slightly above six percent until October 2022 and would start to ease thereafter,” Ricafort said.
Security Bank chief economist Robert Dan Roces said inflation likely settled at six percent with a range of 5.8 to 6.2 percent in July, with the food basket contributing approximately 2.3 percent, and utilities and transport accounting for around 1.2 percent and 1.5 percent, respectively.
“Price growth is still mostly cost-push driven with emergent demand-side risks, and inflation may average around 5.8 percent this second half,” Roces said.
To date, the Monetary Board has raised interest rates by 125 basis points, including the aggressive 75 basis points delivered during a surprise off-cycle rate-setting meeting last July 14 to curb rising inflationary pressures.
“The recent off-cycle hike by the central bank will help relieve the inflationary pressure locally, although upside risks coming from global factors remain significant,” Roces said.
Domini Velasquez, chief economist at China Bank, believes inflation eased to 5.8 percent in July from 6.1 percent in June as the decline in the prices of oil, electricity in areas serviced by Manila Electric Co., and some food items such as meat and fish offset the nationwide transport hike.
“This was also helped by negative base effects from July last year, which will persist until August,” Velasquez said.
Dubai crude prices averaged around $106 per barrel in July, lower than the June average of $115.73 per barrel, amid growing global recessionary fears.
“However, we expect oil prices to recover and stay slightly above $100 per barrel in 2022 as global supply is likely to remain tight largely due to the ongoing war in Ukraine. Saudi Arabia has already raised its August crude prices for Asia, while its September crude prices are expected to hit record-highs due to tight supply and robust Asian demand,” Velasquez said.
“We expect high inflation to persist in the second half of 2022 and peak in the fourth quarter. Food and oil prices will likely remain elevated, but will moderate moving forward. Secondary round effects will also become more pronounced as we move towards end of 2022,” the economist said.