Inflation sizzles to 8.7%

MANILA, Philippines — January numbers unfortunate – BBM

Inflation in the country accelerated in January, hitting its highest rate in more than 14 years and exceeding projections and market expectations, due largely to higher housing and utility costs and food prices.

National Statistician Dennis Mapa said at a briefing yesterday the headline inflation or the rate of increase in the prices of consumer goods and services hit 8.7 percent in January this year, higher than the 8.1 percent in December and the three percent in January last year.

He said the January print is “the highest inflation rate since November 2008 at 9.1 percent.”

The latest inflation print is also above the 7.5 to 8.3 percent forecast of the Bangko Sentral ng Pilipinas (BSP) and the market consensus of 7.6 percent for January this year.

In a video message released by the Presidential Communications Office, President Marcos expressed optimism that inflation would ease in the second quarter because of an expected drop in the prices of fuel and agricultural products.

He said his administration has undertaken measures to increase the supply of agricultural goods and to lower their prices but they “have not yet gone through the system.”

“It is unfortunate that we get the news today that inflation has continued to increase up to 8.7 percent,” Marcos, also the agriculture secretary, said.

Out of the 13 commodity groups being tracked by the Philippine Statistics Authority, Mapa said nine registered higher increases.

He said the main driver of the uptrend in inflation was the faster increase in costs related to housing, water, electricity, gas and other fuels at 8.5 percent in January this year, from seven percent in December last year, with housing rentals, electricity and water being the major contributors.

Food and non-alcoholic beverages came in next, rising to 10.7 percent in January this year from 10.2 percent in December last year.

Inflation for food alone edged up to 11.2 percent in January this year from 10.6 percent in December last year due to mark-ups in vegetables, tubers, plantains, cooking bananas and pulses; flour, bread and other bakery products, pasta products and other cereals; fish and other seafood; milk, other dairy products and eggs and fruits and nuts.

Restaurants and accommodation services also contributed to the higher inflation rate as it climbed to 7.6 percent in January this year from seven percent in December last year.

Core inflation, which excludes the volatile food and fuel items, rose to 7.4 percent in January this year from 6.9 percent in December last year.

Inflation for the bottom 30 percent income households in the country also moved up to 9.7 percent in January this year from 9.4 percent in the previous month.

Mapa said the inflation for the bottom 30 percent income households in January this year is the highest rate for the income group since the 12.2 percent in March 2009.

As to whether headline inflation rate has room to further accelerate this year, he said: “As a consumer, I would want that that’s already the peak. However, we have to look at the data. There are challenges. Our main risk is food prices. This is what we will monitor.”

With most commodity groups registering increases in January compared to December, he said “there are risks associated with relatively high inflation across different commodity groups.”

Relief

In his video message, Marcos said agricultural products are being imported to augment supply but admitted the lowering of prices would “take a little time.”

“My continuing estimate or forecast is that... we can see the lowering of inflation by the second quarter of this year,” the President said.

“With fuel prices going down and the prices of agri products with the importation slowly also going down, I think that we will see the effects on the inflation rate further down the road and I sincerely believe that this is going to be as high as it’s going to get,” he added.

Nicholas Mapa, senior economist at ING Bank in Manila, said supply and demand side pressures are likely to keep inflation elevated in the coming months.

As the BSP holds its policy meeting next week, he said it is expected to deliver a 50 basis points rate increase given surging inflation.

“BSP increased rates on consumer credit last January which could act as an additional tightening measure to combat searing inflation. Price pressures are broad-based and BSP will likely need to sustain rate hikes until we see inflation head back towards target in a convincing manner,” he said.

To temper price pressures, the National Economic and Development Authority (NEDA) said the government is prioritizing higher agricultural productivity, food supply augmentation and energy security.

“As part of the administration’s eight-point agenda and the Philippine Development Plan (PDP) 2023 to 2028, the government is implementing measures to ease price pressures and cushion the impact of inflation, especially on basic commodities,” NEDA Secretary Arsenio Balisacan said.

He said NEDA has been working with other agencies to ensure the timely and efficient implementation of the strategies and programs under the PDP, particularly modernization of the country’s agriculture and agribusiness to ensure energy security.

In order to keep food price movements consistent with the government’s inflation and food security objectives, he said short-term measures are set in place to augment supply, including temporary easing of import restrictions, as well as price monitoring and targeted social support.

In the medium- to long-term, the priority is to ensure food security through higher agricultural productivity and ensure energy security through an energy transition and development program.

“Our measures are meant to balance the interests among local food producers, consumers and the overall economy,” Balisacan said.

The release of the latest inflation figure has prompted workers to renew calls for increase in their daily take-home pay.

New wage orders

The Kilusang Mayo Uno (KMU) said it is now time for the different Regional Wages and Productivity Boards (RTWPBs) to issue new wage orders to help workers cope with the rising prices of commodities.

According to KMU, the purchasing power of workers has eroded significantly due to soaring inflation.

Partido ng Manggagawa (PM) said the P570 minimum wage in the National Capital Region (NCR) has already eroded by P88 as of December 2022 and is expected to erode further because of inflation.

“We call for a new round of wage hikes to recover the lost purchasing of workers not just in Metro Manila, but in the whole country,” PM chair Renato Magtubo said.

He called on Congress to legislate a P100 across-the-board wage hike for workers nationwide. He explained that they are just demanding wage recovery and not an actual salary increase.

KMU also urged both the House of Representatives and the Senate to pass the National Minimum Wage bill.

It also called on President Marcos to come out with an executive order mandating salary adjustments for workers nationwide.

KMU said big companies can afford to provide wage increases while the government should extend assistance to enable micro-small and medium enterprises (MSMEs) to grant pay hikes.

For its part, the Federation of Free Workers (FFW) stressed the need for President Marcos to focus more on addressing the country’s problems, including inflation, instead of frequently going abroad.

“If only the President would concentrate more on dealing with our problems at home, then we could have at least prevented the further rise in inflation,” FFW vice president Julius Cainglet said.

He said the President has been remiss in his duties as agriculture secretary as his administration appears more busy arresting union leaders and activists. – Alexis Romero, Mayen Jaymalin