Inflation rate eased to 3.7% in June —PSA

Inflation rate snapped its four-month acceleration streak in June amid slower increases in utility and transportation costs during the period, the Philippine Statistics Authority (PSA) reported on Friday.

At a press conference, National Statistician and PSA chief Claire Dennis Mapa said inflation — which measures the rate of increase in the prices of goods and services — slowed down to 3.7% last month, a slight decline from the 3.9% rate in May.

This brought the year-to-date inflation print to clock in at 3.5%, falling within the government’s ceiling of 2% to 4%.

June’s inflation rate also fell within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 3.4% to 4.2% for the month.

Mapa attributed the easing of inflation rate last month to the slower increase in the inflation of Housing, Water, Electricity, Gas, and Other Fuels, and Transport.

In particular, the Housing, Water, Electricity, Gas, and Other Fuels Index contributed 65.8% to the decline in inflation rate in June.

The utilities index saw an inflation print of 0.1% from 0.9% in May.

The main contributor to the decline in utilities was the deflation in electricity costs to -13.6% from -8.5% month-on-month.

To recall, the country’s largest power distributor Meralco announced a P1.9623 per kilowatt-hour (kWh) reduction in household electricity rate in June due to implementation of staggered collection of generation costs from the Wholesale Electricity Spot Market (WESM) as ordered by the Energy Regulatory Commission.

Meanwhile, the Transport index posted a rate of 3.1% last month, slower than 3.5% in May, and contributed 13.9% to the overall downtrend.

The slower year-on-year increase in gasoline prices at 2.3% inflation rate from 5.2% in the prior month was the primary factor in the slowdown in Transport index’s inflation rate.

Also contributing to the overall inflation decrease was the Restaurants and Accommodation Services index, which accounted for 7.4%.

The Restaurants and Accommodation Services index’s inflation print decelerated to 5.1% from 5.3% month-on-month.

Slower inflation rates were also seen in the following indices:

• Alcoholic beverages and tobacco at 3.8% from 4.2%
• Clothing and footwear at 3.2% from 3.4%
• Furnishings, household equipment and routine household maintenance at 2.8% from 3.1%
• Personal care, and miscellaneous goods and services at 3.2% from 3.4%

While overall inflation rate declined last month after four straight months of acceleration, Mapa said indicators are not yet clear if the slowdown seen in June will continue for the remaining months of 2024.

This as the heavy-weight Food and Non-Alcoholic Beverages index saw an increase of 6.1% from 5.8% month-on-month.

Moreover, food inflation, which tracks the movement of food items in a “basket” commonly purchased by households, rose to 6.5% in June from 6.1% in May — indicating that food prices remain elevated.

Mapa said the faster food inflation was brought by faster increases in vegetables and meat at 7.2% from 2.7% and at 3.1% from 1.6%, respectively.

Vegetable supply was affected by the onset of the rainy season last month.

Pork prices at 3.9% inflation from 2.4% increased amid the rise in African swine fever cases, while chicken prices at 2.4% inflation from -0.3% rose as the temporary import ban on poultry products from the United States and Australia affected supply.

Rice, on the other hand, saw a slight decline to 22.5% from 23% months ago-on-month, but still at double-digit levels.

In a statement, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said, “We are committed to maintaining the country’s inflation rate within our target range of 3 to 4 percent.”

“The easing in our inflation rate in June, mainly due to lower electricity rates, highlights the importance of strengthening our energy sector to sustain our gains,” Balisacan said.

“We will continue to work closely with the government, stakeholders, and other priority sectors to implement necessary measures to ensure that the country will have a sufficient and affordable food supply — including rice — for every Filipino,” he added.

Inflation in and outside NCR

Tracking the trend at the national level, inflation rate in Metro Manila eased to 2.3% in June from 3.1% in May due to the decrease in utilities costs.

For areas outside the National Capital Region, inflation print was flat at 4.1%.

Bangsamoro Autonomous Region in Muslim Mindanao registered the highest inflation for the fifth consecutive month at 5.3% in June, while Region I (Ilocos Region) remained as the region with lowest inflation rate for the sixth consecutive month at 2.8%, according to the PSA.

Inflation for bottom 30%

Inflation felt by the bottom 30% income households in the country increased to 5.5% from 5.3% month-on-month as food inflation for the income class accelerated to 8.4% from 8.2%.

Vegetable inflation for the bottom 30% rose to 4.1% from 1.5% while meat inflation accelerated to 3% from 1.8%.

Inflation outlook

“The balance of risks to the inflation outlook has shifted to the downside for 2024 and 2025 due largely to the impact of lower import tariffs on rice under Executive Order (EO) 62 (Series of 2024),” the BSP said.

“Nonetheless, higher prices of  food items  other than rice, transport charges, and electricity rates continue to pose upside risks to inflation,” the central bank said.

The BSP said its Monetary Board supports the national government’s implementation of the reduction in the tariff on rice imports to address supply-side pressures on prices and sustain the disinflation process. 

“Moving forward, the BSP will ensure that monetary policy settings remain in line with its primary mandate to safeguard price stability conducive to sustainable economic growth,” it said. —KBK, GMA Integrated News