Inflation rate slows down to 3.3% in August

The Philippines’ inflation rate eased in August, after an acceleration seen in the prior month, due to slower increases in food and transportation cost during the period, the Philippines Statistics Authority (PSA) reported on Thursday.

At a press conference, National Statistician and PSA chief Claire Dennis Mapa said that inflation —which measures the rate of increase in the prices of goods and services— decelerated to 3.3% last month, slower than the 4.4% rate in July.

This brought the year-to-date inflation print in the first eight months of 2024 to 3.6%, a slowdown from the 5.3% rate in the same period last year and still within the government’s ceiling of 2% to 4%.

It also fell within the Bangko Sentral ng Pilipinas’ (BSP) forecast of 3.2% to 4%.

"Ang pangunahing dahilan ng mas mababang antas ng inflation nitong Agosto 2024 kaysa noong Hulyo 2024 ay ang mas mabagal na pagtaas ng presyo ng food and non-alcoholic beverages sa antas na 3.9%," Mapa said.

(The main reason for the slower inflation in August 2024 versus July 2024 was the slower increase in the prices of food and non-alcoholic beverages at 3.9%.)

The Food and Non-Alcoholic Beverages index saw a faster inflation rate in July at 6.4%.

The slowdown was due to lower inflation prints in cereals and cereal products at 11.5% from 15.6%, vegetables at -4.3% from 6.1%, and fish and other seafood at -3.1% from -0.8%.

The Food and Non-Alcoholic Beverages index had a 69.6% share to the overall inflation downtrend in August.

"Ang pangalawang dahilan ng mas mababang antas ng inflation nitong Agosto 2024 kaysa noong Hulyo 2024 ay ang pagbagsak ng presyo ng transport," the PSA chief said.

(The second contributor to the lower inflation print in August 2024 compared to July 2024 was the decline in transport costs.)

"Ito ay nagtala ng -0.2% inflation at 25.4% share sa pagbaba ng pangkalahatang inflation sa bansa," Mapa said.

(This clocked in at -0.2% and 25.4% share to the overall downtrend.)

The slower transport inflation was due to the declines in gasoline at -5.8% from 5.4%, diesel at -8.4% from 9.2%, and passenger transport by sea at -28.3% from -1.3%.

Food inflation

Moreover, food inflation, which tracks the price movements of food items in a "basket" commonly purchased by households, eased to 4.2% from 6.7% month-on-month.

The slowdown in food inflation was primarily brought by the decline in rice inflation to 14.7% from 20.9% in July.

Mapa said the decline in August's rice inflation is consistent with the PSA's assumption that the rate of increase in the grain staple's price will slow down towards the second half of 2024 due to higher base effects from last year.

Apart from rice, the sub-index of vegetables, tubers, plantains, cooking bananas and pulses saw a decline to 4.3% from 6.1% month-on-month.

"The sustained easing of inflation will support growth in household consumption, which elevated prices have long suppressed. Low-income households will benefit from the decline in food inflation, as food constitutes more than half (51.4 percent) of the consumption of the bottom 30 percent of households," National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said in a statement.

"Moreover, as businesses have identified persistent inflationary pressure as a significant concern, the recent stability and moderation in inflation will encourage investments, especially as borrowing costs are declining. Most importantly, the appetite for business expansion will improve as consumer spending increases," added Balisacan.

Core inflation, which excludes volatile food and energy items, also decelerated to 2.6% from 2.9% in the prior month.

NCR and beyond

Similar to the national trend, inflation in Metro Manila eased to 2.3% from 3.7% month-on-month due to slower increments in the indices of food and non-alcoholic beverages (at 2% from 5.2%) and transport (at 0.1% from 3.5%).

For areas outside the National Capital Region, inflation clocked in at 3.6%, down from 4.6% in July due to the slower annual increase in the Food and Non-Alcoholic Beverages index at 4.3% in from 6.6% month-on-month as well as transport which saw a decline to 0.2% from 3.6%.

The PSA said 15 regions in areas outside NCR exhibited lower inflation rates in August with Region I (Ilocos Region) remaining as the region with the lowest inflation for the eighth consecutive month at 1.8%, while Region XI (Davao Region) registered the highest inflation of 4.9% during the period.

Bottom 30%

Meanwhile, inflation felt by the bottom 30% income households also eased to 4.7% from 5.8%, bringing the average print for the income class from January to August to 4.9% from 5.6% year-on-year.

Similar to the national trend, the slowdown in inflation for the bottom 30% class was brought about by the lower growth in food and non-alcoholic beverages at 5.8% from 8.3% and transport at 0.1% from 3.6%.

Food inflation for the bottom 30% also saw a deceleration to 6% from 8.7%, primarily due to the slower increase in rice prices at 16.4% from 22.8% in July.

Impact of power prices, weather

Moving forward, while inflation continues to trend downward primarily due to reduced import tariffs on rice, Balisacan said potential pressures could emerge from higher electricity rates and above-normal weather disturbances.

"The government is prepared to address these pressures to ensure stable inflation. Preparations to counter the effects of the La Niña phenomenon are underway, including improvements in early warning systems, the utilization of communication systems to issue warnings about dam openings, measures to address the potential accelerated speed of livestock diseases, and greater involvement of local government units in information dissemination, are in progress. Notably, the government has allocated P15 billion for national risk reduction in 2024," the NEDA chief said.

The BSP, likewise, said the balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025 with a slight tilt to the upside for 2026.

The central bank said the downside risks are linked mainly to lower import tariffs on rice, while upside risks could come from higher electricity rates and external factors.

"The government will continue to implement measures to reduce further inflationary pressures, including enhancing agricultural productivity, expanding logistics infrastructure, and ensuring the efficient delivery of social services. These efforts are crucial not only for stabilizing prices but also for ensuring that economic growth translates into tangible improvements in the lives of all Filipinos," Balisacan said. — RSJ/ VDV, GMA Integrated News