Inflation faster in December at 3.5% as pork, vegetable prices sustain climb

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Metro Manila (CNN Philippines, January 5) — Inflation picked up anew in December ​as food and transport costs continued to rise, the Philippine Statistics Authority said Tuesday. 

Prices of basic goods rose by 3.5% for the month, faster than the 3.3% in November and 2.5% a year ago. ​It is the fastest annual pickup since February 2019's 3.8%, and marks the fourth straight month of an uptrend.

This falls within the 2.9-3.7% forecast range given by the Bangko Sentral ng Pilipinas last week, which assumed that higher prices of fuel and agricultural goods led the increases.

Inflation tracks the movement of prices of widely-used goods such as rice, crops, electricity, water, and fuel.

National Statistician Dennis Claire Mapa said the increases were led by food and drinks, which rose by 4.8%. In particular, pork prices rose by 10% due to a surge in demand during the holiday season as well as some supply limitations due to the African swine fever.

On the other hand, onions and tomatoes still led the 19.7% surge in vegetable costs. Mapa said supply woes following strong typhoons that ruined crops in Luzon, as well as the demand for these common cooking ingredients, triggered the heftier price tags. Fruit prices were also up 6.3% versus the prior year.

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Fish prices also rose 3.1% in December 2020 compared to a year ago, PSA data showed, followed by a 0.1% increase for rice –– the first time in over a year.

Transport costs zoomed faster, recording 8.3% with a 47.2% year-on-year pickup of tricycle fares and 6.6% for jeepneys. Meanwhile, inflation eased for alcoholic drinks and cigarettes, housing and utilities, and home furnishings and maintenance.

The full-year pace of price adjustments remained within the government's 2-4% target band, averaging 2.6%. ​This is slightly faster than the 2.5% print in 2019.

​Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the sustained inflation pickup is "largely transitory" given weather disturbances, adding that pandemic-related uncertainty will likely pull future price trends down. However, prices have been rising faster since September, even before the series of destructive typhoons in November.

READ: Impact of strong typhoons to prolong PH economic recovery — S&P

ING Philippines senior economist Nicholas Antonio Mapa said prices are likely to keep climbing by 3% in the first quarter of 2021 and does not expect the central bank to further slash the key interest rates from the current low of 2%.

By area, December inflation was softer in Metro Manila at 3.2% against a 3.7% pace in the regions. In contrast, the price of rice went up 2.1% in the capital region but was 0.2% lower in the provinces.

Bicol and Cagayan Valley tallied 6.6% inflation in December, the fastest in the country. The provinces of Cagayan and Isabela suffered from massive flooding in November due to Typhoon Ulysses (international name: Vamco), which triggered even higher prices.

Central Visayas logged the slowest inflation rate at 0.9% for the month.

However, the country's poorest households or the bottom 30% income earners absorbed an even faster spike in the cost of basic goods, which climbed 4.3% in December. This is faster than the general 2.6% increase, and was felt through more costly food and drinks, transport fares, and restaurant and miscellaneous goods.