Poll cites price lift from fading base effect

NOVEMBER inflation — which the government will report on Dec. 5 — likely picked up on the back of fading base effects from last year’s successive multi-year highs, according to economists asked last week.

A number of the 16 analysts polled also cited upward inflationary pressure from the African Swine Fever (ASF) outbreak that spurred demand for pork substitutes like chicken, an increase in electricity rates and the seasonal consumption boost as Christmas approaches.

Last week’s poll yielded an estimate median of 1.2% for November, right below the midpoint of the 0.9-1.7% range given last Friday by the Bangko Sentral ng Pilipinas’ (BSP) Department of Economic Research.

Those estimates compare to October’s actual 0.8% — which marked the fifth straight month that inflation eased — and November 2018’s six percent that was a slowdown from the nine-year-high 6.7% recorded in September and sustained in October.

The overall rise in prices of widely used goods averaged 2.6% in the 10 months to October.

Easing inflation this year prompted the BSP last month to further trim its full-year 2019 inflation forecast to 2.4% from an already downgraded 2.5%, though still within its 2-4% inflation target range, compared to last year’s near-decade-high 5.2%.

The median of BusinessWorld’s poll for November would yield a 2.49% year-to-date average, while BSP’s estimate would result in a 2.46-2.54% range as of that month.

“Some of the high base effects also started to wear off in November. Inflation likely has bottomed out and may edge up higher in December,” Jiaxin Lu, economist at Continuum Economics, said in an e-mail.

Alex Holmes, Asia economist at Capital Economics, signaled in an e-mail that inflation could pick up further, noting that “[b]ase effects from the spikes in food and fuel prices last year are set to fade over the coming months.”

Analysts also cited the impact of ASF — whose first outbreak in the country this year was confirmed in early September — on prices of substitutes for pork products.

“We did notice a drop in pork prices while substitutes such as beef, dressed chicken and select fish items were pricier as consumers switched to these other forms of protein,” ING-NV Senior Economist Nicholas Antonio T. Mapa said.

“Upside risk to the relatively low inflation include the impact of African Swine Fever as global meat production slows down, causing some uptick in the prices of pork and alternative meat products,” GlobalSource Partners economist Romeo L. Bernardo said.

Other analysts also cited higher electricity tariffs, as the Manila Electric Co. (Meralco) — the country’s biggest power distributor — jacked up the overall rate by P0.4717 per kilowatt-hour due to higher generation charges in the October supply month. “In addition to fading base effects, also a roughly five percent month-on-month increase in Meralco electricity costs over the month [could have spurred inflation],” ANZ Research economist Mustafa Arif said.

For UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion, “[t]he Christmas fever may have already seeped through consumption… as evidenced by the recent successes of online sales initiated by online retail firms like Lazada and Shopee, and it is anticipated that the next online sale, as the Christmas season nears, will eventually rake in more sales and revenues.” — Luz Wendy T. Noble