July inflation quickens to 6.4%, highest in 4 years

MANILA, Philippines — The country’s inflation rate continued to accelerate in July, reaching the highest level in almost four years, amid faster increases in food and transport prices, according to the Philippine Statistics Authority (PSA). Inflation rate reached 6.4 percent in July, higher than the 6.1 percent recorded in June, as well as the 3.7 percent in July last year.

In a press briefing, National Statistician Dennis Mapa said last month’s inflation rate was the highest since October 2018 when it reached 6.9 percent.

Last month’s inflation is at the upper end of the 5.6 to 6.4 percent forecast of the Bangko Sentral ng Pilipinas (BSP) for July.

The latest inflation result brought the average for the January to July period to 4.7 percent, above the BSP’s two to four percent target range for the year.

As the inflation rate went up in July, Mapa said the purchasing power of the peso declined to 86 centavos, compared to the base year of 2018.

“The reason for the higher inflation in July is the faster increase in prices of food and non-alcoholic beverages,” he said.

Inflation for food and non-alcoholic beverages accelerated to  6.9 percent in July from six percent a month ago.

Food items that contributed to the higher inflation rate were fish, chicken, sugar and bread and baked products.

Mapa said the higher inflation rate in July was also driven by the transport index as it grew to 18.1 percent from 17.1 percent in June.

In addition, restaurants and accommodation services contributed to the higher inflation rate in July, rising to 3.4 percent from 2.8 percent in June.

To stem a further increase in the inflation rate and protect consumers, the  National Economic and Development Authority (NEDA) said the government would work to ensure the availability of affordable food, and reduce transport and logistics costs.

“In our near-term socioeconomic agenda, we want to ensure that there’s sufficient and healthy food on the table of every Filipino. We are also helping reduce energy, transport and logistics costs, especially for vulnerable sectors of our population. It is our urgent priority to ease price pressures and protect the public’s purchasing power through the implementation of programs that will help Filipinos cope with the effects of higher inflation rate,” Socioeconomic Planning Secretary Arsenio Balisacan said.

NEDA said the release of the P4.1 billion second tranche of the targeted cash transfer program, which will benefit over four million Filipino families, is expected to mitigate the impact of high prices.

“To boost local food production, the government will continue to support the agriculture sector through lower input costs, development of new farming technologies, extension of financial assistance to farmers, and strengthening the agricultural value chain,” Balisacan said.

As oil prices remain elevated, the NEDA said the government would also accelerate the distribution of the second tranche of subsidies for public utility jeepney drivers and operators, as well as the support for tricycle drivers.

Mapa said inflation may not have peaked yet, with some commodity groups like restaurants and accommodation services showing price increases only last month as these are unable to immediately respond to rising costs of raw materials.

ING Bank Manila senior economist Nicholas Mapa said   inflation is expected to pick up in the coming months, with second round effects just starting to kick in.

He said recent wage hikes and transport fare adjustments continue to feed through to the rest of the consumer price index basket, and recent price increases of bread makers and retail outlets in the past month show inflation has hit more than energy and imported food items.

“The emergence of these second round effects suggests that price pressures are more pervasive,” he said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said there has been delay in the effects of wage hikes, transport fare hikes and other price increases in goods and services as some businesses stagger or put off price adjustments due to competition and as many sectors are still reeling from the adverse effects of the pandemic.

“Year-on-year inflation could peak at slightly above six percent until October 2022 and would start to mathematically ease starting November to December 2022, barring any new shocks,” he said.