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Thursday, August 17, 2017 | MANILA, PHILIPPINES
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   economic indicators

Date posted: Monday, August 08, 2016 | Manila, Philippines

BY Janine Marie D. Soliman

Inflation remains steady in July

THE general rise in prices of widely used goods and services steadied in July and remained well below the Bangko Sentral ng Pilipinas’ (BSP) full-year target rate.

Preliminary data from the Philippine Statistics Authority (PSA) show the consumer price index (CPI) rising 1.9% in July, unchanged from the previous month but up from 0.8% in July of last year.

Last month’s headline figure was within the BSP’s forecast range of 1.5%-2.4% but below the 2.1% median estimate in a BusinessWorld poll earlier this week.

“The steady inflation in July is due to slower increases in food prices, which were able to offset higher electricity charges,” Socioeconomic Planning Secretary Ernesto M. Pernia said in a statement.

Inflation for food and non-alcoholic beverages slowed to 2.8% last month from 3% in June. Also keeping overall inflation steady were the continued contraction in prices of transportation as well as of housing, water, electricity, gas and other fuels.

Prices of communication, education and health eased further, while those for clothing and footwear, as well as for restaurant and miscellaneous goods and services were unchanged.

Prices of alcoholic beverages and tobacco picked up pace, but only slightly. Likewise for recreation and culture; as well as furnishing, household equipment and routine maintenance of the house.

DECLINE IN OIL, EASING SUPPLY DISRUPTION
“The decline in oil prices and easing supply disruptions from El Niño may be the main reasons why these commodity groups showed weaker inflation readings,” Land Bank of the Philippines market economist Guian Angelo S. Dumalaga said.

Excluding volatile food and energy prices, core inflation likewise steadied at 1.9% in July.

Mr. Pernia, who is also National Economic Development Authority (NEDA) Director-General, expects the “manageable inflation trend” to persist until yearend, citing the “expanding productive capacity of the domestic economy, persistently low oil prices, solid private household consumption and investment, buoyant business and consumer sentiment, and adequate credit and domestic liquidity.”

“We are thus expecting full-year inflation to average at around 1.98%,” he said.

The July headline reading brought the year-to-date inflation to average at 1.4%, well below the lower end of the BSP’s target rate of 2%-4% for the entire 2016.

IN LINE WITH BSP ASSESSMENT
In a statement, Governor Amando M. Tetangco said the latest inflation numbers “was in line with the BSP’s assessment that inflation will follow a target-consistent path over the policy horizon.”

“Going forward, the BSP will remain watchful of external developments and evolving price trends to ensure price stability conducive to a balanced and sustainable economic growth,” he said.

“The risks to the inflation outlook remain broadly the same -- weaker global growth outlook counterbalanced by steady domestic aggregate demand. But we continue to be mindful of external developments particularly geopolitical risks that could trigger volatility in commodity prices and portfolio rebalancing. Closer to home we will monitor developments with changes in weather patterns that could affect domestic supply chains,” the central bank chief added.

Bank of the Philippine Islands (BPI) associate economist Nicholas Antonio T. Mapa expects inflation to reach 2% by yearend.

“With YTD (year-to-date) inflation at 1.4% and only 5 months left in the year, inflation will need to average 2.6% in the months up until December for BSP to hit the 2% mark for the year,” he said.

Landbank’s Mr. Dumalagan said stronger spending during the Christmas season and pleasant weather would allow inflation to reach the BSP’s lower end target.

“Inflation could still move towards the BSP’s target by yearend, especially when Christmas season buying starts to kick-in... Absent any strong storms that may affect farm production, there might be downward inflation pressures as well arising from El Niño’s waning negative impact on supply,” he added. -- with Melissa Luz T. Lopez

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