Inflation surges to 6.7% in September

Inflation rate surged 6.7 percent in September, hitting a fresh nine-year high weighed by increases in the prices of food items, the Philippine Statistics Authority (PSA) announced on Friday.

"Inflation rate in September 2018 further accelerated to 6.7 percent from 6.4 percent in August 2018," PSA chief Lisa Grace Bersales said in a press briefing in Quezon City.

This is the fastest in over nine years since inflation clocked in at 7.2 percent in February 2009.

Food and non-alcoholic beverages; housing, water, electricity, gas and other fuels; and transport are the top contributors to the overall  inflation, the statistics office said.

"The weight of food and non-alcoholic beverages is 38.34 (percent). For the other components tobacco and alcoholic beverages the weight is 1.58 (percent), for clothing and foot wear the weight is 2.93 (percent); for housing, water, electricity, gas, and other fuels the weight is 22.4 (percent)," Bersales said.

Food and non-alcoholic beverages inflation rate came in at 9.7 percent from 8.2 percent in August.

The September inflation is also slightly slower than the 6.8-percent forecast of the Bangko Sentral ng Pilipinas (BSP) and within its 6.3 to 7.1 percent range.

In a joint statement, the Economic Team composed of the Departments of Finance, Budget and Management, and National Economic and Development Authority linked the high inflation to the  onslaught of Typhoon Ompong last month on the prices of commodities.

"Supply disruptions caused by the onslaught of Typhoon Ompong in the regions of Ilocos, Cagayan, and Cordillera Autonomous Region put upward pressures on food prices," the Economic Team said.

The damage to agriculture, including facilities and infrastructure, amounted to P26.8 billion, has kept the price of the country’s staple grain elevated despite the arrival of some imported rice and the improvement in the rice stocks of the National Food Authority, it said.

"The declaration of a state of calamity we have proposed in these regions through the President’s Proclamation No. 593, series of 2018, should provide some needed relief," it added.

Sought for comment, University of Asia and the Pacific School of Economics dean Cid Teroso said inflation clocking in below forecast means that the "measures taken by the BSP could have started to take effect and demand could have slowed down due to weaker purchasing power brought about by unrelenting price increases across commodities."

To recall, the central bank hiked key policy rates by 50 basis points last month, bringing the overnight borrowing rate at 4.50 percent. The BSP has so far raised interest rates four times this year for a total of 150 basis points.

"At this level, I am having second thoughts on another rate hike from BSP this year," Union Bank of the Philippines chief economist Ruben Carlo Asuncion said.

The PSA noted that non-food inflation slowed to 4 percent from 4.1 percent in August, while inflation in Metro Manila eased to 6.3 percent from 7 percent last month.

"These clear signs of easing boost our confidence that inflation will taper off by year-end and go back to our target range (of 2-4 percent) by early next year. But we must couple this optimism with quick and focused actions in order to sustain gains made so far in keeping inflation in check," the Economic Team said.

The Economic Team also recognized that global fuel prices remain a concern in the near term "given the gloomy outlook on oil supply and an increasing demand for petroleum products during the winter."

"Thus, we urge a quick response to address this upside risk, including demand-side management strategies. One of the proposed measures is to reduce the country’s overall energy demand through the Department of Energy’s (DoE) e-Power Mo program, the Public Utility Vehicles modernization program of the Department of Transportation, and other renewable energy initiatives," it said.

Rice tariffication

The economic managers also reiterated their call for the speedy passage of the bill amending Republic Act No. 8178 or the Agricultural Tariffication Act, which is seen to bring down the price of rice and improve the competitiveness of the rice sector in the long-term.

"We also see the need to restructure the National Food Authority to address its conflicting mandates. We thank the House of Representatives for approving this measure in its third and final reading. We now urge our fellow public servants in the Senate to accelerate its passage."

"This is among the medium to long-term reforms to address inflation, besides the immediate to short-term measures we have proposed through the Administrative Order No. 13, series of 2018, issued by the President."  —KBK, GMA News