Inflation falls for 4th straight month in May 2023

Inflation rate cooled down for the fourth consecutive month in May, thanks to slower movements in transport and food prices, the Philippine Statistics Authority (PSA) reported on Tuesday.

At a virtual press conference, National Statistician and PSA chief Claire Dennis Mapa reported that inflation — the rate of increase in the prices of goods and services — slowed down to 6.1% last month from 6.6% in April, bringing the year-to-date rate to 7.5%.

This is the fourth time that inflation dipped from a peak of 8.7% in January and the lowest since July 2022’s 6.4% rate.

Year-on-year, however, the inflation print in May was still faster than the 5.4% rate seen in May 2022.

Last month's inflation rate falls within the Bangko Sentral ng Pilipinas' forecast range of 5.8% to 6.6%.

"Ang pangunahing dahilan ng pagbagal ng antas ng inflation nitong Mayo 2023 kaysa noong Abril 2023 ay ang mas mabagal na paggalaw ng presyo ng Transport," Mapa said.

(The main factor for the decline of inflation rate in May 2023 versus April 2023 was the slower movement in Transport prices.)

Transport index

The Transport index saw a -0.5% inflation rate, down from 2.6% month-on-month and a 55.3% share in the overall decline in May.

Mapa cited the decline in gasoline (-18.5%) and diesel (-27.6%) prices as well the fall in other passenger transport by road cost (13.4%) for the Transport index’s drop.

The second top contributor to the slowdown in overall inflation was Food and Non-Alcoholic Beverages with 7.4% rate from 7.9% and a 37.3% share in the overall downtrend.

The slower inflation print in the Food and Non-Alcoholic Beverages was due to the easing of prices of fish and other seafoods (5% from 7%); meat and other parts of slaugthered land animals (3.2% from 4.2%); and milk, other dairy products, and eggs (12.1% from 13%).

The third commodity group that contributed to the overall decline was Restaurants and Accommodation Services with 8.3% inflation rate from 8.6% and a 5.7% share to the downtrend.

Mapa said this was due to the slower increase in the prices of restaurants, café and the like with an inflation print of 8.3% from 8.6% month-on-month.

“We are confident that we can achieve the government’s inflation target this year as we work closely with concerned government agencies in monitoring the primary drivers of inflation,” National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said in a statement.

Likewise, Finance Secretary Benjamin Diokno said that “the new inflation number and the declining trend give confidence that inflation would be within the target range of 2% to 4% by September this year.”

Tracking the the national trend, inflation in the National Capital Region (NCR) slowed down to 6.5% from 7.1% in April.

Similarly, inflation in areas outside NCR clocked in at 6% from 6.5% month-on-month.

Mapa said that the for the second straight month all regions outside NCR recorded slower inflation rates in May, with Cordillera Administrative Region remaining as the region with the lowest inflation for the third consecutive month at 3.9%, while MIMAROPA Region recorded the highest inflation at 7.2%z

Meanwhile, the inflation felt by the bottom 30% income households in the Philippines was registered at 6.7%, also exhibiting downward trend for the third month in a row.

The NEDA chief said that President Ferdinand R. Marcos Jr. issued Executive Order No. 28, las month, which formed the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO).

The committee aims to enhance government coordination in managing inflation and mitigating the impact of rising commodity prices.

Balisacan said the committee is keeping tabs not only of current trends and data on local and international prices but also the level of domestic production, import arrivals, climate outlook, and other relevant supply and demand information for key commodities. 

“As the risks to the inflation outlook lean towards the upside due to potential increases in transport fares, wage adjustments, higher electricity rates, and domestic prices of key food items resulting from the impact of El Niño, the government is working to implement the necessary interventions as we aim to keep prices low and stable for Filipino consumers,” said the NEDA chief.

For short-term measures, Balisacan said that there is a need to fill local supply gaps through timely importation, ensure sufficient rice buffers during El Niño, and strengthen biosecurity.

To mitigate the impact of El Niño on food security, the country’s chief economist recommended ensuring an adequate supply of agricultural inputs, prepositioning pumps, promoting early planting in areas likely to experience water deficit in the coming months, and maximizing production in non-threatened areas.

“With accurate data at hand, we can anticipate possible food and energy shortages and provide timely recommendations to prevent increases in commodity prices. This will ensure food and energy security and safeguard the purchasing power of Filipino families, especially the poor and vulnerable,” Balisacan said. — KBK/RSJ, GMA Integrated News