By Katherine K. Chan, Reporter
PHILIPPINE INFLATION quickened to its fastest pace in over three years in September as prices of food, transport and utilities surged, the Philippine Statistics Authority (PSA) said on Tuesday.
Headline inflation, as measured by the consumer price index (CPI), accelerated to 7.2% in September from 6.1% in August and 1.7% a year ago. This matched the April clip and was the fastest in three-and-a-half years or since the 7.6% in March 2023.
However, it was still within the Bangko Sentral ng Pilipinas’ (BSP) 6.4%-7.4% estimate.
September also ended four months of deceleration and blew past the 6.7% median estimate of 22 analysts in a BusinessWorld poll.
The headline clip has been above the BSP’s 3% target for seven consecutive months, bringing the average inflation to 5.4% as of September.
“September’s inflation rise was driven mainly by disruptions in food supply caused by adverse weather and higher global oil prices,” Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said in a statement. “These are significant supply-side pressures, but they are being met with targeted interventions to mitigate the impact on households.”
According to National Statistician Claire Dennis S. Mapa, faster price increases in food, transport, and utilities fueled inflation last month.
Inflation for the heavily weighted food and nonalcoholic beverages index accelerated to 6.7% in September from 4.6% in August, marking the fastest pace since the 7% in October 2023.
“There are a lot of risks, particularly (in the) food items, as we have seen. And plus, of course, there is the El Niño,” Mr. Mapa told a press briefing. “Vegetables were, of course, affected by the flooding. Their prices really increased from August, which were (in the) negative (territory).”
Inflation for vegetables, tubers, and the like quickened to 10.7% from -3.4% in August, while rice inflation heated up to an over two-year high of 20.3% from 19.4%.
“Rice inflation accelerated due to tighter domestic supply and higher transportation costs,” the BSP said in a separate statement. “Fish and vegetable inflation also rose as weather disturbances disrupted supply, while renewed concerns over the spread of swine flu drove meat inflation.”
In the second half of September, the average price of regular milled rice jumped by 24.58% year on year to P49.97 a kilo from P40.11 a kilo, while well-milled rice increased by 18.74% to P56.07 a kilo from P47.22 a kilo.
Food prices rose after supplies were disrupted by heavy rainfall and flooding that battered parts of the country last month.
Still, Mr. Mapa noted that the impact of the “Super El Niño” on consumer prices will likely be felt more in the coming months.
According to the Philippine Atmospheric, Geophysical and Astronomical Services Administration, the country may encounter a “very strong” El Niño season until December this year, which could persist until the first half of next year.
TRANSPORT, UTILITIES
Meanwhile, PSA’s Mr. Mapa noted that they are seeing persistent price pressures from energy items in the household and transport segments.
Transport inflation came in hotter at 14.6% in September from 13.5% in August as gasoline and diesel posted faster inflation of 40.9% (from 36.2%) and 61.3% (from 55.7%), respectively.
Fuel retailers raised pump price for three straight weeks in September as global oil prices surged amid the reescalation of the Middle East war.
Pump price adjustments during the month stood at a net increase of P14.39 per liter for gasoline, P14.48 per liter for diesel, and P12.83 per liter for kerosene.
According to Mr. Mapa, the September transport inflation data does not account for the fare hikes for all public utility vehicles that were implemented on Sept. 28.
He also attributed part of the faster inflation last month to higher utility costs, with inflation for housing, water, electricity, gas, and other fuels picking up to 8.4% from 7.9%.
“Rental fees also made a significant contribution this month,” Mr. Mapa added. “While its inflation was 4%, housing rental has a substantial weight (in the CPI basket), accounting for more than 12%. So, when rental costs rise, they have a significant impact on the inflation rate.”
Electricity inflation also quickened to 14.6% in September from 14.4% in August, while inflation for liquefied petroleum gas was faster at 30% from 29.6%.
This came even as the Manila Electric Co. trimmed electricity rates for a second straight month by 4.09 centavos per kilowatt-hour (kWh) to P14.7424 per kWh in September from P14.7833 per kWh in August.
LOOMING RISKS
Meanwhile, the BSP said it remains vigilant and “will continue to assess the impact of latest developments in the Middle East and weather disturbances on the outlook for inflation and growth.”
Mr. Mapa said there is a risk that inflation will accelerate further in the coming months as the transport fare hikes and the impact of the El Niño feed into consumer prices.
“We don’t know whether it (will still be above) 7% (in the coming months), but what we are seeing is that, as I’ve said, there are a lot of risks,” he said. “Our inflation rate, at least the month-on-month uptick, was relatively broad-based, affecting 11 of the 13 commodity groups. It was also geographically spread out, recorded in 16 of the 18 areas.”
“So, while we hope it will go down, what we’re seeing is that there are a lot of risks in terms of the items plus what we refer to as the heavyweights in our basket — food, energy, and transport,” he added.
Core inflation, which excludes volatile food and energy prices, quickened to 4.7% in September from 4.1% a month ago and 2.6% a year earlier. This was the same clip recorded in November 2023 and was the fastest core print in nearly three years or since the 5.3% in October 2023.
Inflation in the National Capital Region (NCR) also picked up to 5.4% in September from 4.1% in August and 2.7% in the prior year, while those outside NCR saw a faster inflation of 7.6% from 6.6% in the previous month and 1.5% last year.
PSA data also showed that inflation for the bottom 30% of income households sizzled to 9% from 8.2% in August and the -0.2% clip last year. This was the fastest since the 9.7% in February 2023, bringing the average inflation for the bottom 30% to 6.5% in the nine-month period.
Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. noted that price pressures from the fare and minimum wage increases may be stickier, which could drive inflation faster starting October.
This, alongside the El Niño impact, may prompt the BSP to extend its tightening cycle until the first half of next year, he noted.
“We expect a 25-bp (basis point) rate hike in October followed by another one in December, which will bring the policy rate to 5.5% by yearend,” Mr. Neri said in a commentary. “Additional rate hikes during the first half of 2027 remain possible, with the policy rate potentially reaching 6% depending on the extent of El Niño’s impact on inflation.”
Chinabank Research said inflation may quicken further in the fourth quarter, potentially peaking in November, giving the BSP more reason to tighten its monetary policy anew.
Transport fare hikes, according to Chinabank Research, could contribute about 1.4 ppts to headline inflation, while the Super El Niño could drive food and utility prices even higher.
“With price pressure likely to remain elevated and the worst of this inflation episode still ahead, we expect the BSP to deliver another 25-bp rate hike in October,” it said.
Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the faster-than-expected headline print in September opens the door for a larger 50-bp policy rate hike.
“September’s 7.2% inflation is a wake-up call. The rise in both headline and core inflation suggests price pressures are broadening beyond food and fuel,” he said via Viber.
“The immediate priority is to address supply-side constraints, particularly in food and energy, before inflation becomes more entrenched across the economy. This also raises (the) probability of a 50-bp hike in policy rates,” he added.
The central bank has delivered a total of 75 bps in rate hikes since it began tightening in April, with its benchmark interest rate standing at an over one-year high of 5%.
The policymaking Monetary Board is set to hold its next rate-setting meeting on Oct. 22.
