Feb. inflation hits 4.5%, fastest in over 3 years

Inflation continued accelerating to its fastest pace in over three years, data released by the Philippine Statistics Authority (PSA) on Tuesday showed using 2006 as the base price.

February’s inflation rate clocked in at 4.5 percent, compared with 4.0 percent in January 2.7 percent recorded in December 2017.

It was the fastest in over three years, since inflation came in at 4.9 percent in August 2014.

“The uptrend resulted from the faster annual gain recorded in the heavily-weighted food and non-alcoholic beverages index at 4.8 percent and the double-digit annual increment in alcoholic beverages and tobacco index at 16.9 percent,” the PSA said.

Also driving inflation faster last month were higher prices of clothing and footwear; furnishing, household equipment, and routine maintenance of the house; transport; and restaurant and miscellaneous goods and services.

There were transitory factors at play, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said in a separate text message.

Updated forecast

“The elevated February inflation figure is in line with our updated forecast for a temporarily higher inflation than target range in 2018 due to transitory factors,” he said.

The BSP forecasted inflation between 4.0 and 4.8 percent in February, spurred by higher utility rates and higher excise taxes on petroleum products and sugar-sweetened beverages. The original forecast was 2.0 to 4.0 percent.

Based on the 2012 base price, headline inflation picked up by 3.9 percent in February, still the highest in over three years registering at 4.2 percent in August 2014.

“Based on the 2012 re-based index, however, inflation remains within target both in February and most likely for 2018,” Espenilla noted.

“Our forecast remains that inflation will decelerate back to well within target in 2019 whether based on 2006 or 2012 index,” he said.

Independent economic consultant John Paolo Rivera said inflation continues to seek its true level under newly implemented tax reform law.

Adjusting to TRAIN law

“Inflation is still adjusting subject to TRAIN law. It’s not immediate because commodity prices are still converging to a final price as suppliers fully understand the underlying provisions of the tax reform,” he said.

President Rodrigo Duterte signed into law the proposed Tax Reform for Acceleration and Inclusion (TRAIN) Act in December. It took effect in January, lowering the personal income tax and expanding the value-added tax (VAT) base.

“While a 4- to 5-percent inflation rate is realistic, this is due to the price adjustments brought about by the tax reform,” Rivera noted.

“Such is expected since it’s the basic commodities such as food, beverages, and gasoline that have been primarily hit by the TRAIN law,” he said.

The National Economic and Development Authority expects the inflationary impact of the tax reform law at 0.7 percentage point this year.

On Sunday, the DOF downplayed the impact of TRAIN on prices and claimed it did not have any effect on inflation as reported by the PSA in January except for higher prices of sugar-sweetened beverages. —VDS, GMA News