Philippine headline inflation accelerates in May on increased food prices, to average 2.9 pct in 2019

Philippine headline inflation accelerates in May, mainly due to increased food costs. On a year-on-year basis, the consumer price inflation accelerated to 3.2 percent from 3 percent seen in the prior month. The annual rate came in higher for the ‘food and beverages’ and ‘housing and utilities’ components but decreased or stayed the same for the remaining components.

The core inflation rate also accelerated somewhat, rising to 3.5 percent year-on-year in May from April’s 3.4 percent. However, core rate rose 0.2 percent sequentially in May, a slower rate than in recent months.

Increased food prices can be linked to a rise in vegetable and fruit prices. Vegetables prices rose 12.6 percent year-on-year in May, after averaging 4.8 percent for the initial quarter of the year. This might reflect the early impact on the El Nino phenomenon.

In spite of the acceleration in annual inflation, the headline rate is expected to remain around the mid-point of the BSP’s target in the months ahead, noted ANZ in a research report. Decelerating growth momentum is expected to restrict demand pressures. Moreover, a high base effect will also come into play in the second half of the year.

“We forecast headline inflation to average 2.9% in 2019, as does the Bangko Sentral ng Pilipinas. The key risk is a harsher than anticipated El Niño weather pattern occurrence this year”, added ANZ.