September inflation eases to 0.9%

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The increase in prices of goods has little changed from a year ago, with declining food, fuel, and electricity rates pushing inflation to a fresh three-year low.

Metro Manila (CNN Philippines, October 4) — The pace of price increase slowed to a fresh three-year low in September, settling below 1 percent as projected.

Prices of basic goods picked up by 0.9 percent for the month, easing from 1.7 percent in August and the nine-year peak of 6.7 percent in September 2018, the Philippine Statistics Authority (PSA) said Friday. This is the slowest rate logged since April 2016.

National Statistician Dennis Mapa said slower price increases for food items contributed to easing inflation, noting lower rice and corn prices.

The monthly inflation print tracks the price movements of widely-used goods like food and fuel. The government wants the full-year rate within 2-4 percent.

September's rate falls within the 0.6-1.4 percent forecast range given by the Bangko Sentral ng Pilipinas (BSP), and is lower than the 1.1 percent median from a CNN Philippines poll among 10 economists.

Prices of food and non-alcoholic drinks, as well as transport costs both declined by 0.9 percent year-on-year, according to PSA data. The cost of rice plunged by 8.9 percent, reversing last year's 10.4 percent price surge to mark the fifth straight month of a decline.

Rice prices soared in late 2018 due to supply problems. Mapa said rice prices will continue to drop with increased supply due to affordable imports, thanks to the rice tariffication law. The drop in rice prices is the biggest since 1995, according to PSA data.

The cost of housing and utilities also helped ease price upticks given cheaper electricity and fuel rates.

Inflation averaged 2.8 percent in January to September, against the full-year forecast of 2.5 percent.

Looking ahead, Mapa said he expects softer price increases to persist even during the holiday season barring any price shocks. He added that the PSA has not seen a spike in meat prices so far, at a time when African Swine Fever has hit hog raisers in certain parts of the country.

In a statement, the BSP said the latest inflation print is consistent with its forecasts and flagged that the headline rate will "pick up slightly" in the last three months of 2019. It added that volatile world crude prices due to tensions in the Middle East could put pressure on prices, but may be offset by uncertainties in the global economy.

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Nicholas Antonio Mapa, senior economist at ING Bank Manila, said separately that price movements appear "benign" as food costs become stable with more imports eyed for key crops. He added that this will give more space for the BSP to further trim interest rates, following three easing waves so far this year meant to reverse last year's tightening moves.