PH inflation moderates to 16-month low at 4.7 percent in July

According to the Philippine Statistics Authority, inflation moderated further in the previous month, dropping from 5.4 percent in June 2023. The deceleration was primarily due to slower food and non-food inflation.

“While we continue to experience a downtrend in inflation, we need to be vigilant, especially as we face increasingly volatile weather disturbances as well as external headwinds such as oil price increases and trade restrictions on food,” stated NEDA Secretary Arsenio M. Balisacan.

He assured the public that the government is proactively monitoring the supply and demand situation of key commodities to achieve its inflation target of 2 to 4 percent by the end of the year.

Food inflation decelerated to 6.3 percent in July 2023 from 6.7 percent in June, as inflation rates of the following food items slowed: fish and other seafood (4.5% from 6.2%), eggs & dairy products (9.7% from 11.2%), bread & other cereals (10.1% from 11.0%), and sugar (21.4% from 28.9%).

Meanwhile, non-food inflation further eased to 3.3 percent in July 2023 from 4.1 percent in June 2023. Inflation of electricity, gas, and other fuels slowed from 5.2 percent to 2.5 percent, while inflation for passenger transport services declined from 11.2 percent to 7.2 percent.

Non-food items, including food services, housing rentals, and passenger transport, remain the top contributors to inflation, contributing a total of 1.8 percentage points. On the other hand, agricultural commodities such as vegetables, rice, fish, and dairy products contributed a total of 1.5 percentage points.

To ensure that the current weather disturbances will not have a lingering impact on inflation and the economy for the rest of the year, Balisacan said that the government has proactively taken steps to deploy its resources to affected areas as well as prepare its policy and on-the-ground response as it expects more typhoons and weather disturbances from the El Niño.

“The government will implement necessary measures to prevent price spikes, protect the purchasing power of Filipino families, and sustain our economic recovery and momentum,” he added.

The. 4.7 percent headline inflation settled within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 4.1-4.9 percent for the month.

The resulting year-to-date average of 6.8 percent, however, is still above the Government’s average inflation target range of 2.0-4.0 percent for the year.

Core inflation, which excludes selected volatile food and energy items in order to capture underlying demand-side price pressures, also slowed down to 6.7 percent in July from 7.4 percent in June.

On a month-on-month seasonally adjusted basis, inflation was nil in July from 0.1 percent in the previous month.

Inflation continued to ease as most food commodities, particularly fish and sugar, posted slower price increases.

Meanwhile, meat prices declined amid decreased consumer demand. Likewise, lower electricity rates and LPG prices, as well as slower increases in rents, pushed down non-food inflation.

The continued decline in year-on-year transport inflation, owing in part to base effects, also contributed to the moderation of headline inflation.

The latest inflation readings support the BSP’s assessment that inflation will return to the target range by Q4 2023 in the absence of further supply shocks.

Nonetheless, the BSP will continue to closely monitor evolving conditions in view of persistent upside risks to the inflation outlook.

The BSP is prepared to resume monetary policy tightening as necessary to anchor inflation expectations and safeguard the BSP’s price stability objective.

In light of global climate uncertainties and food supply challenges, the Inter- Agency Committee on Inflation and Market Outlook (IAC-IMO) and the Economic Development Group (EDG) held a joint meeting last July 20, 2023 to discuss proposed policy adjustments that seek to ensure a more stable supply of agricultural products to meet the demand of different users and end- consumers adequately.

At the same time, the Committee reiterated the productivity-enhancing and efficiency-improving strategies laid out in the Philippine Development Plan 2023-2028 concerning agriculture and agribusiness.

These measures aim to secure the country’s food supply, prevent sudden increases in agricultural commodity prices, improve the well-being of farmers and fisherfolk, and ensure the vital contribution of agriculture to other sectors of the economy.