Inflation climbs to 3-year high in June

The rate of increases in prices in the country climbed to a three-year high at 6.1 percent in June from 5.4 percent in May, amid persistent food price increases especially chicken and fish, and non-alcoholic beverages across all regions, the Philippine Statistics Authority (PSA) reported Tuesday, July 5.

With rising inflation, PSA said, the value of P1 has dropped to just P0.87 or 87 centavos when buying food and other goods.

The 6.1 percent headline inflation is higher than May’s 5.4 percent and from same time last year of 3.7 percent. For the first six months, the consumer price index (CPI) averaged at 4.4 percent, above the government target of two percent to four percent for 2022 and 2023. But, the June inflation is within the central bank’s forecast range of 5.7 percent to 6.5 percent.

The last time CPI was at the six-percent level was November 2018. It was also in 2018, during a financial crisis where stockmarkets lost $7 trillion, that inflation peaked at 6.9 percent in September and October.

National Statistician and Civil Registrar General Undersecretary, Dennis S. Mapa, in a press briefing on Tuesday said they have yet to see the peak in inflation. He said indicators and data from the ground show that CPI is poised to move up more since price increases are detected in nine regions out of 13. This is not common, he said, that all regions are all on the uptrend.

“We’re still seeing increases in prices,” Mapa told reporters. He said the slope in prices from January to June is “very steep” every month and it is happening in almost all of the regions. “Based on our monitoring there are expectations that these prices, particularly food prices, will still move upward,” he said. The Bangko Sentral ng Pilipinas (BSP) only forecasts five percent average inflation for this year.

Mapa also said rising inflation further eroded the value of the P1 and its actual purchasing power is only P0.87. This is lower than P0.89 in March when inflation rose to four percent from three percent in February at the onset of the Ukraine invasion by Russia and its impact on global oil and non-oil commodity prices. On Tuesday, the peso fell to an intraday low of P55.11:$1 from Monday’s close of P55.08. The peso since the start of 2022 has lost more than P4.

The purchasing power of the peso, which is a function of the CPI, is losing value when inflation is rising. Since the CPI base year is 2018, Mapa the purchasing power at P0.87 is the lowest in the last four years.

“In June, our P1 is only worth 87 centavos,” he said. This is a cumulative decline compared to the CPI base year. “Let’s look at the gap (and compare it) to three and half years. We will come up with this data,” said Mapa. He added that this is "not extraordinary" since the peso loses value with high inflation.

The June inflation rose primarily because of the higher annual growth rate of six percent in the food and non-alcoholic beverages index compared to 4.9 percent in May.

The transport index also grew by 17.1 percent versus 14.6 percent previously. The latest annual increase in the transport index is a 14-year high from the last time in 2008 of 17.4 percent.

Mapa said the recent transport fare hikes are already reflected in the June inflation. Last month, the average fare in the National Capital Region (NCR) for the first five kilometers is P11.50, up by 9.5 percent from the previous.

In areas outside of the NCR, jeepney fare for the first five kilometers is also higher at P14.50. The weight of transport in the CPI is currently nine percent, it is the fourth highest in the commodity group. The biggest in terms of CPI weight is food and non-alcoholic beverages at 35 percent.

The annual rates of the following also grew in June: alcoholic beverages and tobacco, 7.8 percent; clothing and footwear, 2.2 percent; housing, water, electricity, gas and other fuels, 6.6 percent; furnishings, household equipment and routine household maintenance, 2.9 percent; health, 2.6 percent; recreation, sport and culture, 1.9 percent; and personal care, and miscellaneous goods and services, 2.6 percent.

The PSA reported that inflation for food at the national level increased further to 6.4 percent in June from 5.2 percent in May, and from 3.9 percent in June 2021.

Food inflation grew faster during the period due to the higher annual growth in the meat and other parts of slaughtered land animals index at 8.1 percent. Fruits and nuts food group also registered an inflation rate of 1.1 percent from -2.4 percent in May.

The rest of the food groups exhibited faster annual growth rates, except for vegetables, tubers, plantains, cooking bananas and pulses food group which registered a lower inflation of 14.4 percent, based on PSA data.

In the NCR or Metro Manila alone, inflation was up at 5.6 percent in June from 4.7 percent in May, with food and non-alcoholic beverages index rising at 6.1 percent from 4.6 percent in the previous month. This was followed by transport index which grew by 17.2 percent annually.

In areas outside of the NCR, inflation increased to 6.3 percent from 5.5 percent. All sixteen regions outside of the NCR registered higher inflation with Cordillera Administrative Region and Region III or Central Luzon posting the highest rate at 7.5 percent. The Bangsamoro Autonomous Region in Muslim Mindanao continued to report the lowest inflation at 3.1 percent.

Meantime, the CPI for the bottom 30 percent income households increased to five percent in June versus 4.3 percent in May. The year-to-date average was 3.7 percent.

In Metro Manila, inflation for the bottom 30 percent rose to 5.1 percent in June from 4.1 percent previously and in areas outside of the NCR, it is five percent, also up from 4.3 percent in May.

Mapa said the rising inflation has been on the steep side since February. Inflation in February was only three percent and when the Russia-Ukraine war started on Feb. 28, the rate surged to four percent in March, 4.9 percent in April and 5.4 percent in May.

This is why PSA expects the CPI to move up further from 6.1 percent in June. The PSA conducts price validation every week. Sources of price hikes will come from meat, fish particularly seafood, and vegetables, said Mapa. While pork prices have softened, the cost of chicken has increased while the price of sugar is also steadily rising.

“The impact is wide,” said Mapa.