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By Katherine K. Chan
HEADLINE INFLATION accelerated to a six-month peak in September, primarily due to pricier fuel and vegetables, yet stayed below the central bank’s 2-4% objective, the Philippine Statistics Authority (PSA) reported on Tuesday.
Initial data from the PSA indicated that the consumer price index rose to 1.7% in September from 1.5% in August, though it softened from 1.9% in September 2024.
This represented the quickest inflation rate since 1.8% in March.
It also fell within the Bangko Sentral ng Pilipinas’ (BSP) 1.5-2.3% prediction for the month, yet was lower than the 1.9% median forecast from a BusinessWorld survey conducted last week.
September also marked the seventh consecutive month that inflation remained beneath the BSP’s 2-4% target.
During the nine months leading up to September, inflation averaged 1.7%, a decrease from 3.4% in the same timeframe last year.
In contrast, core inflation, which excludes fluctuating food and fuel prices, reduced to 2.6% in September from 2.7% in August. Nevertheless, it was quicker than the 2.4% rate from a year earlier.
The average core inflation stood at 2.4% during the nine-month period, tapering from 3.1% in the same period last year.
National Statistician Claire Dennis S. Mapa noted that the September inflation figure was “not unexpected” as recent typhoons increased vegetable prices.
“This September brought no surprises because, obviously, we anticipated a significant rise in vegetable prices, which we had already witnessed in August; it simply carried over into September,” Mr. Mapa said in a blend of English and Filipino. “This continues to reflect the impact of the floods and typhoons we experienced in July. There were indeed numerous storms during that time.”
As per the PSA, the transport index was the primary factor driving quicker inflation in September, climbing to 1% from a 0.3% drop the prior month. In September, gasoline prices fell at a slower rate of 0.9% from 6.1% in August, while diesel prices increased to 5.1% from a 0.8% decrease.
The heavily weighted food and nonalcoholic beverage index rose to 1% in September, an increase from 0.9% in August.
Food inflation accelerated to 0.8% in September from 0.6% the previous month, though slower than the 1.4% from a year ago.
This was largely driven by an annual increase in vegetables, tubers, plantains, cooking bananas, and pulses at 19.4% in September compared to 10% in August. This represented the quickest pace in vegetable inflation in nine months or since 21.1% in January.
Conversely, corn experienced a milder annual decrease of 4.5%, down from 11.8% in August.
“What we truly witnessed were rains and flooding, especially in our vegetable-producing areas,” Mr. Mapa stated. “Thus, this influence was felt in August and persisted into September.”
“We anticipate this trend may last in the upcoming months because we have faced storms again recently. It is likely that our inflation rate will stay somewhat raised,” he added.
Last month, typhoons Mirasol, Ragasa (locally known as Nando), and Bualoi (Opong), along with the southwest monsoon, caused heavy rainfall and flooding in several regions of the country.
“The slight rise in inflation highlights the sensitivity of local food prices to supply disruptions,” Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan remarked in a statement. “We are collaborating with various agencies to stabilize supply, maintain the affordability of essential goods, and protect household welfare.”
RICE DEFLATION CONTINUES
In contrast, the drop in rice prices eased in September, with the annual rate relaxing to -16.9% from -17% in August. September marked the ninth consecutive month of rice deflation.
“Rice prices largely continued to decline due to sufficient supply, lower international rice prices, and governmental actions to stabilize costs,” the BSP stated.
The average price of local regular milled rice decreased by 1.02% month on month to P37.79 per kilo in the final week of September from P38.18 per kilo, according to data from the Agriculture department.
Well-milled rice also fell by nearly 1% to P43.10 per kilo from P43.52, while special rice edged up by 0.2% to P57.10 per kilo from P56.99.
On September 1, the National Government imposed a 60-day import ban on regular and well-milled rice to address declining farmgate prices of unmilled rice.
Conversely, meat inflation decelerated to 6% from 7.1% in August, while fish and other seafood prices also decreased to 7.9% from 9.5%.
At the same time, inflation in the National Capital Region (NCR) slowed to 2.7% in September from 2.9% in August. However, it was higher than 1.7% in September 2024.
Outside NCR, inflation increased to 1.5% from 1.1% in August, but remained lower than the 2% rate from a year ago.
Central Visayas continued to be the region with the highest inflation rate at 4.1%, while the Bangsamoro Autonomous Region in Muslim Mindanao experienced the most significant price decline at -1.5%.
For the lower 30% of income households, inflation witnessed a slower annual drop to -0.2% from -0.6% in August. The nine-month average held at 0.3%, down from 4.6% a year ago.
OUTLOOK
Despite emerging threats to inflation, the central bank noted that inflation will likely average below the 2-4% target this year, primarily due to declining rice prices.
“Nonetheless, increased rice tariffs and rising global food prices may heighten supply-side pressures over the policy horizon. Meanwhile, higher electricity costs might be mitigated by expectations of subdued global oil prices owing to a stable production outlook,” the BSP stated.
The BSP projects inflation to average 1.7% this year.
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion mentioned that the underwhelming inflation figure could prompt the BSP to lower interest rates on Thursday.
“Growth has been particularly unpredictable lately, and we believe that the BSP would consider a reduction to preempt potential downside risks to overall growth,” he stated. “Thus, lower-than-anticipated (inflation) provides further justification for the BSP to act now, avoiding the risk of lagging behind.”
However, Chinabank Research perceives emerging inflation risks as a cue for the central bank to pause at its upcoming meeting.
“While overall price growth is still projected to remain low for the duration of the year, increasing upside risks to the inflation outlook could lead the BSP to adopt a more cautious stance and keep interest rates unchanged in Thursday’s policy meeting,” it remarked in a note.
John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, stated that developments in rice supply and transportation costs will continue to influence inflation in the months ahead.
“In the following months, inflation may persist in rising due to risks such as weather-related supply interruptions, holiday expenditure, the predicament of global oil prices, and a weakened peso that could elevate import expenses,” he noted in a Viber message.
A BusinessWorld survey indicated that 10 out of 16 analysts expect the Monetary Board to maintain rates steady at 5% on Thursday.
BSP Governor Eli M. Remolona, Jr. previously mentioned that the policy rate is currently at their “Goldilocks” level or “sweet spot” for both inflation and output. However, he stated last month that they are open to lowering rates again this October if the economy shows signs of weakness due to diminished demand.
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