Lower food prices slow down inflation in August 2016

Inflation in August 2016 slowed to 1.8 percent from 1.9 percent in the previous month, due to slower adjustments in food prices, according to the National Economic and Development Authority (NEDA).

"The relatively low and manageable inflation environment during the first eight months of 2016 is expected to continue for the rest of the year as risks around the inflation projections are considered to be low," said Socioeconomic Planning Secretary Ernesto M. Pernia.

"We are thus expecting full-year inflation to be close to the lower end of government's target of 2.0 to 4.0 percent," he added.

Food inflation slowed down to 2.5 percent in August 2016 from 2.8 percent in the previous month. This was due to slower price adjustments of meat, vegetables and corn, which tempered higher prices of rice, fruits, sugar, and non-alcoholic beverages.

According to Pernia, "food inflation will stay stable given ample supply of palay and corn, which could keep upward price pressures at bay. Moreover, the plan to import more rice through next year will add to the country's buffer stock and ensure that overall food prices remain stable."

However, rice inflation slightly increased to 0.5 percent in August from 0.0 percent in the previous month. This could be attributed to the decline in rice production and low levels of stock in the country due to El Nino, Typhoon Nona during the 4th quarter of 2015, and the northeast monsoon rains last January 2016.

Also, the non-food group registered higher inflation of 1.1 percent in August from 0.9 percent in the previous month. This was driven by stronger price pressures of housing, water, electricity, gas and other fuels, transport, furnishings, household equipment, clothing and footwear, health, as well as restaurants and other goods and services.

However, the reduction in electricity charges observed in August 2016 was negated by higher global oil prices due to a pickup in global oil consumption and slowdown in crude oil production.

On the domestic front, Pernia urged government to hasten preparations for La NiAa, which may begin developing in the fourth quarter of the year.

"There is also a need to ensure that prices of utilities such as electricity and water are stable. Existing petitions for upward adjustment in power prices should be reviewed comprehensively as it remains an upside risk in inflation rates," he added.

Source: Philippine Information Agency