Inflation eases to 4% in July

Inflation slowed down further in July mainly due to slower uptick in transportation cost during the period, the Philippine Statistics Authority (PSA) reported on Thursday.

“Ang headline inflation o ang pagtaas ng presyo ng mga produkto at serbisyo sa bansa ay bumagal sa antas na 4.0% nitong Hulyo 2021,” PSA chief and National Statistician Claire Dennis Mapa said at a virtual press briefing.

(The headline inflation or the rate of increase in prices of products and services decelerated to 4.0% in July 2021.)

Last month’s figure continued the downtrend recorded in June at 4.1%. This is, however, faster than the 2.7% posted in July 2020. It is also within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 3.9% to 4.7%.

“Ang dahilan ng pagbagal ng antas ng inflation nitong Hulyo 2021 ay ang mas mabagal na paggalaw ng presyo ng Transport na may 7.0% inflation at 77.5% share sa pagbaba ng pangkalahatang inflation sa bansa,” Mapa said.

(The main reason for the easing of inflation in July is the slow movement in the price of Transport which has 7.0% inflation and 77.5% share in the slowdown of overall inflation in the country.)

The downward trend in the Transport index was due to the decrease in tricycle fare at 11.3% from 17.6%, petroleum and fuels at 17.7% from 21.5%, and domestic air fare at -8.6% from -1.3%.

The July inflation rate brought the year-to-date average to 4.4%, still above the government’s 2% to 4% target range.

Also contributing to the deceleration in the overall inflation were the slower annual increases recorded in the indices of the following commodity groups:

• Alcoholic beverages and tobacco at 10.2% from 11.2%
• Furnishing, household equipment and routine household maintenance at 2.3% from 2.5%
• Restaurant and miscellaneous goods and services at 3.6% from  3.9%

Meanwhile, major contributors to the overall inflation in July are Food and Non-alcoholic Beverages; Housing, Water, Electricity, Gas, and Other Fuels; and Transport.

Food and Non-alcoholic Beverages is the top contributor to the overall rate with 48.1% share and an inflation of 4.9% from 4.7%.

The increase in the food and non-alcoholic beverages index was due to the uptick in fish prices with an inflation of 9.3% from 8.7% and vegetables at 5% from -2.7%. Slower hike was recorded in meat at 16% from 19.2%.

The Housing, Water, Electricity, Gas and Other Fuels index recorded an inflation of 2.6% from 2.4% with a share of 14.7% to the total.

The main contributors to the index are electricity with 5.3% inflation from 1.4%, liquefied petroleum gas with 12.7% rate from 8.2%, and house rent with 1% from 1.8%.

The third commodity group with the biggest share in the overall inflation in July is Transport with 14.5% share.

On the other hand, inflation for the Food index went up to 5.1% in July from 4.9% in June.

This was due to the acceleration in the annual rate of vegetables index to 5% from an annual decrease of -2.7%.

“In addition, annual upticks were higher during the month in the indices of corn at 6.4%; fish, 9.3%; and oils and fats, 4.4%,” the PSA said.

Also, the annual decline of -1% in rice in July was smaller than its annual drop of -1.1% in the previous month.

Inflation in Metro Manila, outside NCR

Inflation in the National Capital Region was flat at 3.2% due to mixed annual growth rates in the indices of commodity groups observed during the month.

In areas outside NCR, the same trend as the national level was observed as inflation in the area eased further to 4.3% in July, from 4.4% in June 2021.

Six regions in areas outside exhibited lower inflation during the month.

The lowest inflation among the regions in the area in July at 2% was recorded both in Region VII (Central Visayas) and Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), while the highest inflation of 6.9% was seen in Region II (Cagayan Valley).

Inflation for bottom 30%

The country’s inflation for the bottom 30% income households increased to 4.4% in July from 4.3% in June 2021.

“Ang dahilan ng pagtaas ng antas ng inflation para sa bottom 30% income households nitong Hulyo 2021 ay ang mas mabilis na pagtaas ng presyo ng Food and Non-alcoholic Beverages na may 4.1% inflation at 100% share,” Mapa said.

(The reason for the higher inflation for the bottom 30% income households in July is the faster increase in the prices of Food and Non-alcoholic Beverages with 4.1% inflation and 100% share.)

This is due to the increase in the prices of vegetables at 4.8% from 0.1%, fish at 9% from 7.6%, and corn at 5.2% from 2.9%.

In a separate statement, BSP Governor Benjamin Diokno said the July inflation is consistent with the central bank’s assessment that inflation could settle close to the high end of the target range of 2% to 4% over the near term before decelerating back to within the target by end of the year as the impact of government supply side measures take effect.

“The continued implementation of direct non-monetary interventions to ease supply constraints remain crucial in tempering inflation pressures,” Diokno said.

“The balance of risks to the inflation outlook remains broadly balanced over the policy horizon. The uptick in international commodity prices due to supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation,” he said.

The BSP chief noted that the emergence of new coronavirus variants and delays in easing  lockdown measures are seen to pose downside risks to both demand and inflation.

“The Monetary Board will consider the latest price developments and the second quarter 2021 gross domestic product outturn in its assessment of the monetary policy stance on 12 August 2021,” Diokno said.

“The BSP remains watchful over the evolving economic conditions and challenges brought about by the pandemic to ensure that the monetary policy stance remains consistent with its price and financial stability objectives,” he added.   —KBK, GMA News