Inflation quickens in July as transport prices rise

Metro Manila (CNN Philippines, August 5) — Prices of basic goods rose even faster in July led by a sustained spike in transport costs, the Philippine Statistics Authority said Wednesday.

The inflation rate stood at 2.7 percent for the month, up from June's 2.5 percent and from the 2.4 percent pace tallied in July 2019. This is the fastest rise in prices since January, and sustains a third straight month of price increases.

Consumer prices rose by an average of 2.5 percent from January to July, PSA said, from 3.3 percent during the same period in 2019. 

In a press briefing, National Statistician Dennis Mapa said transportation costs saw the biggest increase year-on-year. This is due to higher commuter fees, led by a nearly 34 percent surge in tricycle fares, sustaining June's trend. Tricycles were among the first public utility vehicle units to operate in most areas, but were limited to just one passenger per trip.

Domestic airfares also posted a 12.6 percent rise, while ferry boat rides cost 27.7 percent higher compared to July 2019, data showed.

Other items which saw higher price tags were cooking gas, home rentals, and running water, as well as expenses incurred for restaurant meals, barbershops, and personal care. The last three sectors were allowed to resume operations for the month in areas under general community quarantine. However, this was rescinded in Metro Manila, Rizal, Bulacan, Laguna, and Cavite — the country's biggest economic hub — for the next two weeks to prevent additional COVID-19 infections.

Inflation tracks the price movements of basic goods like food and fuel. The Bangko Sentral ng Pilipinas earlier said that higher oil and rice prices may push costs up, while lower electricity rates and a stronger peso may offset the impact as most of the nation stayed under more relaxed quarantine rules.

Food prices, which accounted for the bulk of the overall inflation rate, saw mixed movements. Meat prices went up by almost 5 percent, while the cost of rice, sugar, and corn went down year-on-year. Price increases for fish, fruits and vegetables softened when compared to a month ago. Meanwhile, health-related expenses steadied versus a year ago.

By location, prices rose faster in the provinces at 2.9 percent, against a 2.2 percent average in Metro Manila. It was highest in Bicol at 4.2 percent.

The country's poorest families were hit harder by price adjustments, with inflation among the 30 percent lowest income-earning households settling at 2.9 percent. These families mostly spend what they have on the basics like food, utilities, and shelter.

Inflation will remain largely benign for the rest of 2020, and is expected to stay within the 2-4 percent desired range, Bangko Sentral ng Pilipinas Governor Benjamin Diokno told reporters.

"With moderate inflation, the BSP is likely to focus more closely on growth in its policy rate decisions in the months ahead," HSBC economist Noelan Arbis said, pointing out an expected "sizeable" contraction of the economy in the second quarter. He added that containing coronavirus infections remains the biggest concern for economic officials, as failing to do so would hamper efforts for a recovery.