Sept inflation at 1.9%, lowest in over 4 years

IMAGE Daniella Marie Agacer from INQUIRER FILE PHOTOS

Headline inflation in September fell sharply to its lowest charge in additional than 4 years, pushed by a slower rise in prices for meals, transport, housing and utilities like water and electrical energy, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary knowledge from the company confirmed that the rise within the costs of primary items and providers as measured by the buyer worth index slowed to 1.9 p.c year- on-year in September, easing from the three.3 p.c in August and 6.1 p.c final yr.

This was additionally decrease than the Bangko Sentral ng Pilipinas’ (BSP) projection of two to 2.8 p.c from the earlier month, in addition to the two.5 p.c common inflation forecast reported in an Inquirer ballot final week.

September’s inflation charge represented the slowest progress because the 1.6 p.c recorded in Could 2020. When accounting for seasonal differences, month-on-month inflation fell by 0.1 p.c.
For the primary 9 months, inflation averaged 3.4 p.c, nonetheless higher than the 6.6 p.c in September 2023.

Nationwide Statistician Dennis Mapa attributed the cooling inflation to the slower improve in meals and nonalcoholic drinks, transport and utilities reminiscent of water and electrical energy.

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Rice costs

Meals inflation alone plummeted to 1.4 p.c in September from 4.2 p.c within the earlier month and 10 p.c final yr.

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The first purpose for the slowdown in meals inflation was rice, which cooled to five.7 p.c, down from 14.7 p.c in August. This represents the bottom progress charge since July 2023, which was 4.2 p.c.

“With rice, it actually has a base impact. And I’ve been mentioning that because the earlier, we will likely be experiencing the slowdown in August, September, October, November … It’ll go down due to larger inflation final yr,” Mapa stated throughout a press briefing.

Transport prices additionally skilled slower progress, declining to 2.4 p.c from a 0.2- p.c contraction the earlier month. In the meantime, worth hikes for utilities, together with housing, water, electrical energy and fuel, eased to three.2 p.c from 3.8 p.c within the prior month.

Though the September inflation slowdown is seen as a constructive improvement, John Paolo Rivera, a senior analysis fellow on the Philippine Institute for Growth Research, warns that it additionally carries dangers.

“There’s a wholesome stage of inflation that may preserve the economic system, each provide and demand, balanced at 2 p.c as agreed by economists. A small quantity of inflation is useful than detrimental,” Rivera informed the Inquirer.

Vacation season

Rivera expects inflation to extend with the method of the vacation season, as heightened client demand might exceed provide, leading to larger costs for items.

For Ruben Carlo Asuncion, chief economist at Union Financial institution of the Philippines, the event is favorable particularly in mild of rising tensions within the Center East. He additionally added that this may play a vital function in guiding the financial coverage selections of the central financial institution.

In a separate notice, Nationwide Financial and Growth Authority Secretary Arsenio Balisacan additional famous that slowing inflation is probably going to enhance client confidence, resulting in elevated spending and consumption, which may encourage enterprise progress.

With inflation nicely throughout the official goal and financial progress staying strong, BSP Governor Eli Remolona Jr. stated in a Bloomberg interview that the central financial institution would unlikely resort to outsized easing strikes.

Remolona defined that the BSP would as an alternative trim borrowing prices by 1 / 4 level one after the other. Transferring ahead, the central financial institution chief stated the important thing charge may go all the way down to round 4.5 p.c by the tip of 2025, from 6.25 p.c now.

“If the information are as we count on, then you definately would have the conventional easing, which is small steps at a time, child steps,” Remolona stated.

The benchmark charge had been slashed to its present stage after the BSP delivered a 25-basis level (bp) lower in August.

In a commentary, Miguel Chanco, economist at Pantheon Macroeconomics, stated the lower-than-expected September inflation “successfully ensures one other BSP lower” on the Oct. 16 coverage assembly of the Financial Board.

“When it comes to financial coverage, we proceed to imagine that the Board will lower by an additional 25 bp at its assembly this month, earlier than stepping up the tempo of easing to 50 bp every time from December till the goal reverse repo charge falls to a terminal stage of 4 p.c,” Chanco stated. INQ