INFLATION, as experienced by low-income households, accelerated in the third quarter, the Philippine Statistics Authority (PSA) reported yesterday.
The bottom 30% of households saw inflation rising to 3% in the third quarter, up from 2.7% in the second quarter and 1.5% a year earlier.
For all households, the PSA is scheduled to report October inflation data on Nov. 7.
The Consumer Price Index for the bottom 30% income segment reconfigures the model basket of goods to reflect food, beverage and tobacco (FBT) weighting of between 74.5% for the Philippines overall (from the total household weighting of 50%) and 74.9% for the National Capital Region (from 40.2%). This and other weightings are thought to more accurately capture the spending patterns of the poor.
“There are three main reasons for this uptick in inflation: the depreciation of the peso, the rise in fuel prices, and the increase in food costs due to weather-related supply constraints,” explained Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (LandBank).
Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines (UnionBank), added: “Food and non-alcoholic beverage commodities that have been major drivers of the uptick this 2017 have impacted the increase in the bottom 30% inflation level.”
The FBT sub-index rose 3% year on year from 2.8% in the second quarter.
Meanwhile, the food index increased 2.9% in the third quarter from 2.7% in the second quarter and 1.6% in the third quarter of 2016.
The PSA reported higher annual gains in rice (1.6% from 1% in the second quarter), corn (2.2% from 0.5%), cereal preparations (1.3% from 1%); fish (8.3% from 7.3%), and meat (4.9% from 4%).
The fuel, light and water sub-index, meanwhile, rose by 5.2% from 4.8% in the previous quarter.
Inflation for the bottom 30% segment in the National Capital Region (NCR) was 4.8%, slowing from the 5.2% recorded in the second quarter. On the other hand, areas outside the NCR were at par with the national average at 3%, increasing from 2.6% in the second quarter.
“Supply and demand conditions in NCR are usually tighter than in other provinces. For this reason, inflation in NCR is normally higher as well,” LandBank’s Mr. Dumalagan said.
“Important things to note are the faster increases in the prices of food and fuel in NCR compared with the other areas in the country,” he added.
Union Bank’s Mr. Asuncion said “Transportation costs of inputs for production may have also played a role as transport costs have increased due to the rising price of fuel.”
Asked for their outlook, the analysts said inflation for the bottom 30%, as well as for all households, is expected to pick up in the fourth quarter and next year.
“We expect inflation to end 2017 at 3.2% and 3.5% in 2018. However, inflation will still be subdued and favorable for economic expansion moving forward,” Mr. Asuncion said.
Mr. Dumalagan expects “[i]nflation to pick up in the fourth quarter, driven by the steady depreciation of the peso and the gradual rise in oil prices.”
“In fact in October 2017, the peso fell to a new 11-year low, a development which would increase the local prices of imported goods.” – Minde Nyl R. Dela Cruz
