By Chino Leyco
The rate of increase in consumer prices continued its downward trend in January as the implementation of higher taxes on petroleum goods was outweighed by the softening prices of food in the local market along with cheaper global cost of oil that dragged down transportation expenses.
Based on the latest consumer price monitoring by the Philippine Statistics Authority (PSA), the headline inflation clocked in at 4.4 percent year-on-year last month, its lowest level in 10- months, and slower compared with the 5.1 percent registered in December last year.
But despite the slowdown, the January inflation was still higher compared with 3.4 percent in the same month last year and above the Duterte administration’s target range for the year of 2.0 percent to 4.0 percent.
According to the PSA, the decline in inflation is mainly attributable to softer increments in heavily-weighted food and non-alcoholic beverages at 5.6 percent from 6.7 percent as well as transport at 2.4 percent from 4.0 percent in December last year.
In January, rice led the top 10 drivers of inflation with 0.5 percentage point contribution, followed by fish, catering services, housing rentals, as well as electricity, gas and fuels with 0.4 percentage point each, non-alcoholic drinks and meat each shared 0.3 percentage point, transportation and tobacco with 0.2 percentage point, and vegetables with 0.1 percentage point contribution.
The latest inflation is the third straight month that the rate rose at a much slower pace and the first time it went below the 5.0 percent level since May last year. It was also below the market expectations of 4.5 percent.
While the rate of alcoholic beverages and tobacco remained at double-digit 16.1 percent due to higher taxes imposed on these so-called “sin” products, this level was slower compared with 21.7 percent inflation in the previous month.
Other factors that contributed to slowed inflation were clothing and footwear that registered 2.5 percent; housing, water, electricity, gas, and other fuels at 4.0 percent; and health at 4.3 percent.
The annual rate of furnishing, household equipment and routine maintenance of the house index, meanwhile, went up at a faster pace of 3.9 percent.
Excluding selected food and energy items, core inflation eased further to 4.4 percent in January from 4.7 percent in the previous month, but this was an acceleration compared with 2.6 percent in the same month last year.
Along with the national figure, Metro Manila also recorded a slower inflation at 4.6 percent in January from 4.8 percent in December and 4.7 percent a year ago.
According to the PSA, the declined inflation rate in the Philippines’ main metropolis was owing to slower rate of alcoholic beverages and tobacco, which settled at 10.8 percent; clothing and footwear at 2.5 percent; and transport at 4.7 percent.
Inflation in areas outside of Metro Manila, the rate also slid further to 4.4 percent from 5.3 percent in the previous month, but it was higher compared with 3.1 percent in January 2018.
In a briefing, National Statistician Lisa Grace S. Bersales said that the January inflation rate has already factored in the scheduled petroleum excise tax increase that was imposed by the government under the Tax Reform for Acceleration and Inclusion act (TRAIN).
In mid-January, majority of local oil industry players implemented the second tranche of TRAIN law that imposed an additional P2.24 per liter on gasoline and diesel, consisting of P2 in excise tax and P0.24 in value-added tax (VAT).
The TRAIN law was heavily criticized last year as the main culprit for the skyrocketing inflation, which averaged at 5.2 percent in 2018, well above the Duterte administration and Bangko Sentral ng Pilipinas’ (BSP) target of 2.0 percent to 4.0 percent.
But for 2019, The BSP, the National Economic and Development Authority, as well as the Department of Finance expect inflation to return to its target range.
Meanwhile, consumer group Laban Konsyumer Inc. said yesterday the 4 .4 percent inflation in January is still high and above the maximum target and yet we enjoyed lower prices of fuel , rice , transportation and electricity for much of the month.
“This should open the minds of the economic managers to admit mea culpa that the tax reform law is a bad law,” said LKI President Victorio Mario Dimagiba.
“The decision to proceed with the 2nd tranche of excise taxes after an earlier decision to suspend for 3 months proved to be wrong. Inflation could have been within the target ranges.”