Lower inflation in June likely—DOF

The Department of Finance (DOF) estimated that the rate of increase in consumer prices, which has been stuck at higher levels for three consecutive months, would decline for the first time in June amid diminishing low-base effect.

Finance Undersecretary and Chief Economist Gil S. Beltran said on Thursday, June 10, that the annual inflation rate may clock in at 4.1 percent this month should the month-on-month headline growth remained at 0.1 percentage point.

“The low-base effect on inflation may be wearing off,” Beltran said in his latest economic bulletin submitted to Finance Secretary Carlos G. Dominguez III. "The headline inflation of 2.09 percent in May last year was the lowest in 2020.”

The Philippine Statistics Authority (PSA) reported last June 4 that the country’s headline inflation kept steady at 4.5 percent in May, the same rate since March 2021.

Last month’s inflation brought the country’s first five-month average to 4.4 percent, faster than the 2.0 percent to 4.0 percent target set by President Duterte’s economic team for the year.

For inflation rate to register again by 4.5 percent this month, Beltran estimated that the consumer price index (CPI) would need to rise by 0.5 percentage point from its level in May.

“Meanwhile, if the month-on-moth growth in June CPI remains at 0.1 percentage point as it was in May, the year-on-year inflation rate would be 4.1 percent,” the DOF official said.

Last month, the deceleration in average food prices from 5.02 percent to 4.87 percent muted the effect of the acceleration in price of non-food items, which rose from 3.84 percent to 4.01 percent.

While meat price maintained its double-digit annual growth of 22.1 percent and fish price picked up pace from 5.98 percent to 7.76 percent, the prices of rice, fruit, and vegetables, meanwhile, declined by 0.77 percent, 1.12 percent, and 6.56 percent, respectively.

“The recovery in international oil prices mainly drove the price of non-food items,” Beltran said.

However, the transport sub-group continued to register double-digit inflation rate of 16.68 percent while the price growth of the electricity and fuels sub-group accelerated from 1.39 percent in April to 2.69 percent in May.

Moreover, meat price inflation continued its double-digit yea-on-year increase, owing largely to the lingering effects of the African Swine Fever on the swine industry.

Preliminary PSA data showed that hog ending inventory declined by 22.6 percent in the first quarter of 2021.

“Hog repopulation will be the medium- to long-term measure to address the supply-side issue. Meanwhile, imports should be able to address the shortfall in domestic supply and help ease meat price inflation,” Beltran said.

According PSA’s survey, price of pork with bones in most regions modestly declined in the second half of May.