DOF expects modest uptick in commodity prices

The slight increase in core inflation last month indicates that consumers may see some modest uptick in commodity prices in the immediate near-term, the Department of Finance (DOF) said.

In the latest DOF economic bulletin, Finance Undersecretary Gil Beltran said that removing the impact of volatile food and fuel prices, core inflation accelerated to its highest level this year at 2.0 percent in August.

Still, Beltran said that the country's low inflation regime will serve as a favorable environment for policy makers to further cultivate and sustain sound economic policies.

"Outlook for the immediate near-term may see modest uptick in inflation, as indicated by the rise in core inflation from 1.9 percent to 2.0 percent," Beltran said in a report submitted to Finance Secretary Carlos Dominguez III.

Headline inflation in August unexpectedly slowed to 1.8 percent from the previous month's 1.9 percent, owing to the decline in prices of index heavyweights non-alcoholic beverages and food, particularly corn, meat, and vegetables.

July's headline figure was below the internal forecast of 2.0 percent by the DOF and the Bangko Sentral ng Pilipinas' (BSP) target range of 2.0 percent to 4.0 percent for the year.

"The lower-than-expected inflation rate is largely accounted for by the continued easing of food prices. While the DOF had expected food prices to rise by 2.7 percent, actual increase turned out to be 2.4 percent," Beltran noted.

In August, the general price increase for food and non-alcoholic drinks further slowed to 2.4 percent from 2.7 percent, contributing 1.0 percentage point to inflation. Recreation and culture also eased to 1.7 percent from 1.8 percent.

Meanwhile, prices of alcoholic drinks and tobacco rose by 6.0 percent from 5.8 percent in July; health increase by a faster 2.7 percent from 2.4 percent; housing, utilities and fuels jumped to 0.1 percent from negative 0.2 percent.

Likewise, furnishing, household and equipment went up 2.2 percent from 2.0 percent previously; transport to 0.1 percent from July's negative 0.1 percent; clothing and footwear rose to 2.6 percent from 2.5 percent; restaurants and miscellaneous services to 2.4 percentfrom 2.3 percent.

On the other hand, communication (0.1 percent) as well as education (1.8 percent) were steady in August.

Moreover, headline inflation for January to August this year averaged at 1.45 percent, below the low end of the government's inflation target of 2.0 percent to 4.0 percent.

Last month, Manila Electric Co.'s (Meralco) rate per kilowatt hour (kwh) for an average of 300 kilowatts-per-month consumption dipped to P8.82 from P8.93 in July and P9.44 a year ago.

Meralco's generation rate per kwh also fell to P3.86 during the month from P4.06 in July and P4.55 in the previous year.

Also, the average price of diesel in Metro Manila among the "big three" oil companies slid to P26.12 per liter from P27.55 in the previous month, although higher than P24.95 registered in the same month last year.

Average price of gasoline during the month also declined to P39.07 per liter from P39.88 in July and P42.94 a year before.

Source: Philippine Information Agency