Inflation likely to remain at 6.1% in July – analysts

A COMBINATION of upward and downward price pressure likely kept Philippine headline inflation at 6.1 percent this July, according to analysts polled by The Manila Times.

Citing higher tariffs, a weaker peso, higher food prices, and lower fuel and energy tariffs, economists at Union Bank of the Philippines (UnionBank), HSBC, Rizal Commercial Banking Corp. (RCBC), DBS, Asia Pacific University (UA&P), Security Bank Corp., Standard Chartered Bank and China Banking Corp. provided a range of forecasts for consumer price growth last month from 5.8 to 6.6%.

The median forecast of 6.1% was up from 3.7% a year earlier, but it was in line with June’s 6.1%, which was the fastest in more than three years.

Also, this compares with Bangko Sentral ng Pilipinas’ estimated range of 5.6 to 6.4 percent for the month. On August 5, the government will officially release inflation data for July.

Rubén Carlo Asunción, chief economist at UnionBank, posted the fastest consumer price forecast for July at 6.6%.

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Analysts at HSBC said headline inflation is expected to rise to 6.4 percent due to the stronger impact of the second round. For example, they mentioned P2 – a 22 percent increase – the minimum jeepney fare increase that went into effect on July 1 across the country.

Analysts stressed that it is also possible that businesses raised prices in response to the mid-June minimum wage hike.

The rapid depreciation of the peso against the US dollar may have contributed to the acceleration of inflation by raising the cost of imports. They added that the local currency lost 6.5% of its value against the US dollar between June 10 and July 18.

“While domestic fuel prices have declined significantly (16.3% below retail prices as of June 30) as global oil prices decline, this fall may not be enough to slow inflation year-on-year. But this may be enough to moderate inflation on a monthly basis,” the economists stressed.

Michael Ricafort, chief economist at RCBC, forecasts consumer prices to hit 6.1 percent, noting the lagging effects of higher wages, higher transport costs and other price hikes for other goods and services affected by the economy. He also said that some companies are hesitant or postponing price increases due to competition.

“Higher prices for other basic commodities such as sugar and other foodstuffs due to the lagged/delayed effects of higher global commodity prices in recent months…in headline inflation; amid ongoing side effects for consumers and the general public,” Ricafort added.

Han Teng Chua, a DBS economist, made the same assessment.

UA&P economist Victor Abola forecasts inflation to hit 6 percent in July.

Robert Dan Rose, an economist and assistant vice president at Security Bank Corp., estimates that consumer price growth will accelerate to 6 percent, with the food basket accounting for about 2.3 percent and utilities and transportation for about 1.2 percent. and 1.5 percent, respectively.

Inflation could average around 5.8 percent in the second half of this year, he said. Price increases continue to be driven primarily by higher costs due to emerging demand-side threats.

“The recent off-cycle rate hike by the central bank will help ease inflationary pressures at the local level, although upside risks from global factors remain significant,” Roses added.

Jonathan Koh, economist at Standard Chartered Bank for Asia and the Philippines, expects consumer prices to rise 5.8 to 5.9 percent in July.

“The reason for the slightly lower inflation rate in July is really due to lower electricity tariffs as well as lower energy prices in July itself,” he said.

Domini Velasquez, chief economist at China Banking Corp., said he issued the lowest forecast of 5.8%, pointing to lower oil prices, electricity prices at Manila Electric Co. (Meralco)-served areas and prices of some foodstuffs, including meat and fish, as offsetting factors for monthly increases in national transport costs.

She also said that last July’s deleterious base effects, which would linger into August, also contributed to July’s inflation.

The central bank said earlier that it expects inflation to settle in the range of 5.6 to 6.4 percent in July, driven by continued increases in food prices, further increases in transport costs and a depreciation of the peso.

“Meanwhile, lower oil prices, reduced electricity rates in areas served by Meralco, and lower pork prices are likely to alleviate some of the price pressures mentioned,” he explained.