Increase in consumer prices further accelerated in January, defying all expectations that it had peaked last December, as food prices remained elevated coupled with costlier utilities and housing rentals, the Philippine Statistics (PSA) reported.

Headline inflation accelerated further to 8.7 percent in the first month of 2023, surpassing the Bangko Sentral ng Pilipinas' forecast of 7.5 percent to 8.3 percent, and the government’s target range of 2.0 percent to 4.0 percent.

Based on the PSA data, the January inflation reading was the highest in over 14-years, or since the 9.1 percent recorded in November 2008. It was also higher than the 8.1 percent and 3.0 percent registered in December and January 2022, respectively.

The January inflation rate came as a surprise to government and private sector analysts who predicted that the rate of increase in consumer prices had peaked last December after accelerating for four consecutive months.

The median estimate of private sector economists for January was only at 7.6 percent. In a briefing, National Statistician Claire Dennis S. Mapa said the faster increase in prices of housing, water, electricity, gas and other fuels caused inflation to accelerate in January.

In particular, Mapa noted the significant jump in rental rates under the housing, water, electricity, gas and other fuels segment.

“Because of the opening up of the economy, rates have adjusted in January. I was looking at the annual inflation in housing rentals in the past three-years during the lockdown—2020, it was 2.5 percent, 2021 it went down to 1.3 percent, and 2022 it increased 2.2 percent,” Mapa said.

“Housing rental was stable at the height of the pandemic, but I think it made some adjustment at 5.4 percent , which is quite high considering its weight in housing, water, electricity, gas and other fuels,” he added.

The continued rise in food and vegetable prices also pushed up inflation rate during the month, with onions being the biggest contributor to food inflation, Mapa said.

“Onions have small weight in our consumer basket, it’s about 0.34 percent—it’s a small number. But its inflation spiked by 132 percent, so while its weight was small, its inflation was really high. Its contribution to food inflation is 12.7 percent,” the PSA chief said.

Food and non-alcoholic beverages as well as housing, water, electricity, gas and other fuels account for at least 70 percent of the basket of goods and services that are monitored by the PSA. Core inflation, which excludes selected volatile food and energy items, also went up to 7.4 percent in January from 6.9 percent in the previous month and 1.8 percent in the same period in 2021, depicting underlying demand-side price pressures.

Finance Secretary Benjamin E. Diokno, who earlier estimated that inflation had peaked in December, told reporters on Tuesday that he is now expecting consumer prices to slowdown beginning in February or March.

“I think with peso stabilizing, oil prices falling and relatively mild La Niña (less unpredictable weather in first half of the year), I expect the declaration of prices to start in the first quarter of 2023,” Diokno said.

For his part, National Economic and Development Authority Secretary Arsenio M. Balisacan said the government has identified measures to keep food price movements consistent with the government’s inflation and food security objectives.

Short-term measures include augmenting supply such as through temporary easing of import restrictions, price monitoring, and targeted social support.

In the medium to long term, the priority consists of ensuring food security through higher agricultural productivity and ensuring energy security by pursuing the energy transition and development program.

“Our measures are meant to balance the interests among local food producers, consumers, and the overall economy,” Balisacan said. President Marcos’ economic managers expect inflation to moderate for 2023 to 2024, with a slower-than-expected global recovery and waning pent-up domestic demand.

Moreover, the impact of central bank policy rate hikes is anticipated to be felt this year.