Inflation at 7-month low in July, first time within gov’t 2021 target

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Metro Manila (CNN Philippines, August 5) — Prices of basic goods rose slower again in July, the Philippine Statistics Authority reported Thursday.

Inflation hit 4% for the month compared to 4.1% the preceding month and 2.7% in July 2020 — bringing 2021’s average so far to 4.4%.

The slowest figure logged during the year to date, July marks the first time inflation rate fell within the 2-4% target band of the Bangko Sentral ng Pilipinas.

The recent figure is slower than the BSP’s 4.3% point inflation forecast and dwells within its 3.9-4.7% target range.

National Statistician Dennis Mapa said the slower price increases for transport, restaurant and miscellaneous goods and services, along with alcoholic drinks and tobacco mainly drove the milder inflation for July.

Transport logged a 7% inflation print during the month, slower than June’s 9.6% with tricycle fares, petroleum and fuels, and domestic air fares as primary sources.

Food and non-alcoholic beverages are once again the top contributor for inflation during the month, added Mapa.

Meat prices increased at a slower pace in July, while fish and vegetable prices went up faster.

Philippine Amalgamated Supermarkets Association president Steven Cua said they observed a 2% to 6% increase in the prices of processed goods and more than 6% for non-basic goods.

He added that the Trade and Agriculture departments are already coordinating with them to possibly carry more imported meats to hopefully drive prices down.

Other major contributors for July inflation are transport along with housing, water, electricity, gas and fuels.

Inflation in the National Capital Region stood at 3.2% in July, steady from June’s rate.

Meanwhile, prices of basic goods climbed slower in areas outside Metro Manila — inflation reached 4.3% in July, compared to 4.4% in June. Central Visayas and BARMM logged the lowest rates during the month at 2%, while Cagayan Valley had the fastest at 6.9%.

Nine regions saw inflation accelerate in July while six posted milder rates of price increases. Inflation, however, steadied in Soccsksargen.

The country’s poorest households or bottom 30% income earners observed a faster rise in prices of basic goods this July — inflation inched to 4.4% during the month from June’s 4.3%. Mapa said the faster inflation for food and non-alcoholic beverage — led by vegetables, fish and corn — primarily contributed to the acceleration observed in July for the said households.

The BSP said the latest figure is “consistent” with its assessment that inflation will settle near the high-end of the 2-4% band in the near term before falling back within target before year-end.

London-based think tank Capital Economics forecasts the Philippines’ headline inflation will keep falling in the months ahead, along with a further loosening up of the central bank’s monetary policy.

“With inflation falling back and the economy in desperate need of extra support, we expect the Bank to act soon,” said Capital Economics emerging Asia economist Alex Holmes, citing the threat of the highly transmissible Delta variant.

The think tank said it expects interest rates to be slashed by 25 basis points during the Monetary Board’s September meeting.

Speaking to CNN Philippines, ING Bank senior economist Nicholas Mapa said he expects inflation to stay elevated over the next few months - especially food prices - due to the impact of monsoon rains on supply of agricultural goods, as well as the implementation of the two-week lockdown.

He also pointed out the high price of imported crude oil, which in return drives up cost of utilities and transport fare.

"This is going to be a theme going forward in the second half of the year. We will likely see inflation close to 4% to quite elevated lalo na (especially) with the weakening of the peso, mas lalong tatatas ang imported inflation (will continue to rise) and headline inflation will stay quite high," Mapa said.

CNN Philippines digital producer Bamba Galang contributed to this report.