June is expected to have seen households spend on education-related items as the new school year began, while seasonal rains jacked up prices of farm products.

THE DEPARTMENT of Finance (DoF) expects that inflation in June quickened further to a fresh six-and-a-half year high as seasonal rains pushed vegetable prices higher and households spent on education-related items as the new school year began.
The DoF estimated a 4.94% rise in prices of widely used goods and services last month, from 4.6% logged in May, according to its latest economic bulletin that was e-mailed to journalists on Tuesday ahead of the Philippine Statistics Authority’s scheduled July 5 report on June inflation.
This is faster than the 4.7% median in a BusinessWorld poll of 12 economists late last week and falls past the midpoint of the BSP’s own 4.3-5.1% estimate for that month.
The economic bulletin said that this was due to “base effects” as well as the “0.35% month-on-month (MOM) increase” that compares to June 2017’s 2.5% annual inflation rate and zero month-on-month increase.
To recall, inflation slowed to its lowest level in five months in June last year — matching January’s pace — on softer food, utilities and transport price increases.
“Month-on-month inflation adjustment may be due mainly to two items — 2.43% MOM rise in education during the opening of classes and 2.27% rise in vegetable prices that usually accompanies incessant rains at the onset of the wet season,” the DoF said.
“Food prices contributed to the YOY uptick mainly due to vegetables.”
The overall increase in food and alcoholic beverage prices likely accelerated to 5.6% last month from 3.04% in June 2017, but was slightly slower than the 5.75% recorded last May.
Broken down, inflation in vegetables will likely record a 7.49% uptick from 0.55% last year and 7.03% in May; rice prices rose by 4.17% overall from 1.22% last year but slightly slower than 4.37% in May; and fish prices accelerated by 10.61% from 7.63% a year ago but slower than the 11.36% in May.
The Development Budget Coordination Committee now expects full-year inflation to clock 4-4.5% — up from a 2-4% projection before its Monday meeting — while the central bank sees it at 4.5%, still beyond its official 2-4% official target band though lower than 4.6% previously.
Moreover, the DoF also noted that prices of “sin” products — tobacco and alcohol — which contributed 0.46 percentage points to headline inflation likely continued to surge by an estimated 20.44% in June from 7.05% in the same month last year, but slower than the 20.54% recorded in May.
“Non-food price also saw 0.33% month-on-month increase, driven by education and petroleum products but tempered by the decline in electricity rates,” DoF noted, even as it clarified that “[t]he P0.90-1/liter (fuel pump) price rollback last June 25 likely came after the survey.”
Prices in the non-food subsector likely rose 3.89% in June, faster than the year-ago 2.04% and the 3.23% a month-ago.
Housing, utilities and fuel prices are expected to have increased by 4.51% in June, faster than 1.84% last year and three percent in the preceding month.
Other items that likely saw faster price increases include transportation (6.9% in June from 3.6% last year and 6.21% in May), education (2.69% in June from 2.05% last year and 1.78% in May); and restaurants and miscellaneous services (3.56% in June from 1.58% but slower than the 3.68% in May).
Prices in the health as well as the clothing and footwear sectors are expected to have slowed to 2.7% and 2.19%, respectively, from 2.84% and 2.6% in June last year. Inflation for health also slowed from 2.77% in May, while that of clothing and footwear steadied. — Elijah J. C. Tubayan

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