Philippine headline inflation eases in June, likely to slow down further in months ahead

Philippine headline inflation eased in the month of June. On a year-on-year basis, the consumer price inflation slowed to 2.7 percent from May’s 3.2 percent, below the midpoint of the central bank’s target band of 2-4 percent. June’s print was the lowest since September 2017. This reflects slower growth in ‘food and beverages’, ‘housing and utilities’ and ‘transport’ components.

On a sequential basis, inflation rate came in at 0.1 percent, a marginal deceleration from May’s 0.2 percent. Food, health and education prices added to the sequential rise. Lower domestic fuel and electricity prices led to falls in the transport and ‘housing and utilities’ components, which provided some offset.

Core rate also slowed down to 3.3 percent year-on-year in June from 3.5 percent year-on-year previously. Sequentially, core inflation came in at 0.25 percent.

Rice and corn prices have been greatly driving down the food prices trend in recent months. Vegetable prices, which caused an uptick in food prices last month, grew at a slower rate of 9.5 percent year-on-year in June.

According to an ANZ research report, headline inflation is expected to decline further in the months ahead, possibly below the 2 percent mark.

“A high base effect will weigh on inflation through the rest of the year and slower growth momentum should keep a lid on demand pressures. We forecast headline inflation to average 2.9 percent in 2019, slightly higher than the BSP’s 2.7 percent. The key upside risk is a harsher than anticipated El Niño occurrence this year”, added ANZ.