Inflation picks up in November, fastest in 21 months

The overall year-on-year increase in prices of widely used goods accelerated to its fastest pace in 21 months in November, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary PSA data showed headline inflation at 3.3% last month, picking up from 2.5% in October and 1.3% in November 2019.

The latest inflation result was the fastest pace in 21 months or since the 3.8% reading in February 2019. It also matched the 3.3% print in March 2019.

The latest headline figure is higher than the 2.7% median in a BusinessWorld poll conducted late last week, and exceeds the 2.4%-3.2% estimate given by the Bangko Sentral ng Pilipinas (BSP) for November.

Year to date, inflation settled at 2.5%, still within the BSP’s 2-4% target as well as the 2.4%-2.6% projection range by the Development Budget Coordination Committee for this year.

Core inflation, which discounted volatile prices of food and fuel, stood at 3.2% in November, picking up from three percent the previous month and 2.6% a year earlier. It averaged 3.1% so far this year.

The PSA attributed the pickup primarily to the heavily weighted food and non-alcoholic beverages, which accelerated at an annual rate of 4.3% in November from 2.1% in October.

The alcoholic beverages and tobacco index likewise contributed to the increase with a 12.3% year on year growth in November compared with 11.3% in October.

Inflation on food items likewise picked up to 4.5% in November from 2.1% the previous month. The PSA noted a double-digit annual increase of 14.6% in vegetables following an annual drop of 0.5% recorded in the previous month.

Other food groups that posted faster annual increases include meat (8.2% from 4.7%), fish (5.3% from 3.7%), fruits (5.6% from 4.6%), and sugar, jam, honey, chocolate, and confectionery (0.4% from 0.2%).

Similarly, the November inflation for the bottom 30% of households picked up to 3.6% from 2.9% in October and 0.7% in November 2019. The inflation rate for this segment was the fastest since the 4.3% reading in February 2019.

Despite decelerating to 7.6% in November from 7.9% a month earlier, the transport index was considered to be among the top contributors to November headline inflation along with agricultural products, according to the National Economic and Development Authority (NEDA).

“This is due to the restrictions on public transport as a result of COVID-19 (coronavirus disease 2019), persistence of African Swine Fever, and damage and losses in high-value crops following the onslaught of several typhoons and flooding in November 2020,” NEDA said in a statement.

“[I]nflation for transport services has remained elevated in the last six months, as a result of social distancing directives and reduced passenger capacities in all modes of public transport,” the NEDA statement further read.

In a Viber message to reporters, BSP Governor Benjamin E. Diokno regarded the November inflation result as “transitory.”

“[I]nflation is expected to settle within the government’s target range of [2-4%] for 2020-2022 as the impact of supply disruptions due to recent typhoons is expected to be largely transitory,” Mr. Diokno said.

Sharing Mr. Diokno’s view on the matter, University of Asia and the Pacific Senior Economist Cid L. Terosa expects the Monetary Board to consider the inflation rate for November as a “footnote or ancillary piece of information” in its final meeting this year on Dec. 17.

Moreover, Mr. Terosa said holiday spending this year will be “more cautious and controlled” given uncertainties brought by the pandemic.

“Inflation will definitely show faster, but manageable rates next year when economic and business activities begin to more confidently perk up, which will depend on clear and unequivocal signs that the pandemic can be managed and controlled,” said Mr. Terosa.

For his part, JPMorgan research analyst Milo Gunasinghe said that the cumulative 200 basis point policy rate cuts by the central bank have likely run their course.

“While the jump in today’s inflation print will likely keep the BSP on hold for the remainder of this year, we think that the November statement means the policy stance will remain accommodative in 2021, although its impact may likely be limited, in our view,” he said in a note sent to reporters.

Security Bank Corp. Chief Economist Robert Dan J. Roces said inflation is expected to pick up by December.

“[T]he quicker inflation print and likely demand-pull during the holiday season could weigh against further rate cuts, and the central bank will likely pause when it meets for the last time this year… and assess the general direction of price growth, and the policy transmission of its recent actions,” Mr. Roces said in a separate e-mail. — Jobo E. Hernandez with inputs from Luz Wendy T. Noble