Nov. inflation likely at 7.8% — poll

By Keisha B. Ta-asan, Reporter

INFLATION likely quickened beyond the Bangko Sentral ng Pilipinas’ (BSP) target for an eighth straight month in November, mainly due to costlier food items and higher electricity rates, analysts said.

A BusinessWorld poll of 15 analysts last week yielded a median estimate of 7.8% for the consumer price index (CPI) in November, faster than the 3.7% print a year earlier and the 7.7% print in October. 

If realized, November would mark eight straight months that inflation has breached the BSP’s 2-4% annual target range, and the fastest in 14 years or since the 9.1% print in November 2008.

The headline inflation figure will also match the 7.8% midpoint of the BSP’s 7.4-8.2% forecast for the month.

The Philippine Statistics Authority will release inflation data on Dec. 6. 

“For November, our inflation view is 7.8% as we still see elevated food price levels owing to the food supply tightness stemming from the weather disturbances in October and early November,” Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said in an e-mail.

The agriculture sector bore the brunt of several weather disturbances this year. Severe Tropical Storm Paeng (international name: Nalgae) caused over P6.4 billion in agricultural damage, and prompting the declaration of a six-month “state of calamity” in Calabarzon, Bicol, Western Visayas and the Bangsamoro Autonomous Region in Muslim Mindanao.

Philippine National Bank economist Alvin Joseph A. Arogo, who gave a 7.9% forecast, noted these four regions contribute a combined 27% to the country’s agriculture, forestry, and fishing industry.

“As such, we budgeted for higher food and non-alcoholic beverages price growth in November and December. Meanwhile, we continue to reflect in our forecasts our view that the second-round impact of the global commodities spike and impact of peso depreciation will likely still be felt in the near term,” Mr. Arogo said.   

Standard Chartered Bank economist Jonathan Koh said in an e-mail that utilities inflation likely went up in November after Manila Electric Co. (Meralco) raised electricity rates.

Meralco raised the overall rate for a typical household by P0.0844 to P9.8628 per kilowatt-hour (kWh) in November.

“Offsetting these upward pressures are the reduction in petroleum and pork prices, the peso appreciation, and base effects,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail. 

In November alone, pump price adjustments stood at a net decrease of P7.5 a liter for diesel and P4 a liter for kerosene. Meanwhile, gasoline prices had a net increase of P0.8 per liter for the month.     

The peso also rebounded to the P56-a-dollar mark in November, closing the month at P56.56 on Nov. 29, up by P1.41 or 2.5% from its P57.97 finish on Oct. 28.

However, China Banking Corp. Chief Economist Domini S. Velasquez said that core inflation is still on an uptrend, and may peak in the first quarter of 2023.

“Our latest estimate shows core inflation might have jumped to 6.1% in November from 5.9% in October. This means that secondary round effects continue to drive higher prices overall,” she said.   

Mr. Roces also said strong local consumption may have pushed core inflation higher in November.

Core inflation, which excludes food and fuel prices, quickened to 5.9% in October from 5% in September.

PEAK IN DECEMBER?
Meanwhile, headline inflation will likely peak in December before slowing down in 2023, analysts said.

“We think the inflation has yet to peak, and see December inflation picking up to around 8% and average 5.8% for 2022,” Oxford Economics assistant economist Makoto Tsuchiya said in an e-mail.

Ms. Velasquez said prices of holiday goods “are at risk of further peaking.” “We hope the government can monitor and prevent unnecessary price increases this December,” she added.

Ms. Velasquez said inflation may settle within her forecast range of 7.7-7.9% in December before easing in 2023.   

The Department of Trade and Industry (DTI) last month said prices of many food products considered as Christmas staples by Filipinos have increased by 1% to over 10% ahead of the holiday season. These products include ham, spaghetti noodles and sauce, quezo de bola and fruit cocktail.

“We think inflation will peak in December at 8.1% and this should start going down starting January next year. We continue to watch the factors that will likely push inflation, especially the increase in the prices of food products brought about by higher fertilizer prices and typhoon damage,” Mr. Arogo said.

Meanwhile, Mr. Roces said he expects the BSP to raise policy rates by 50 basis points (bps) at its Dec. 15 meeting, “with scope to do more in (first quarter of 2023) until inflation cools.”

BSP Governor Felipe M. Medalla said in an interview with Bloomberg TV that the Monetary Board is likely to be split whether the policy rate would be raised by 25 or 50 bps.

“Certainly, we will not do zero and I cannot speak for the rest of the board. But I think the board members will probably be split between whether doing 25 or 50,” he said. 

US Federal Reserve Chair Jerome H. Powell last week signaled it was time to slow the pace of coming rate increases. The Fed is now widely expected to increase rates by 50 bps at its Dec. 13-14 meetings, adding to the cumulative 375 bps it has delivered since March to tame inflation.

“With the holiday season, prices of seasonal products are seen to increase but overall inflation is seen to slow down towards the end of the year with the tighter monetary policy controls set by the BSP,” De La Salle University economist Mitzie Irene P. Conchada said in an e-mail.

The BSP has raised its benchmark interest rate by a total of 300 bps to 5% since May to curb inflation.

“Looking ahead, we expect inflation to decelerate amid dissipation of supply-side shocks and non-monetary measures to contain price increases,” Mr. Koh said.

He added that the effectiveness of non-monetary measures will have to be observed moving forward.