Philippine headline inflation accelerates in June, likely to average 1.7 pct in H2 2020

Philippine headline inflation accelerated in June to the higher end of the forecast range given by the central bank. On a year-on-year basis, the consumer price inflation accelerated to 2.5 percent from May’s 2.1 percent. On a sequential basis, the headline inflation jumped to 0.5 percent from May’s 0.1 percent.

The rise was mainly driven by transport cost and prices of alcohol beverages, which came in at 6.8 percent and 0.9 percent respectively. These large gains were slightly countered by lower prices in the ‘food and non-alcoholic beverages’ category, which came in at -0.2 percent sequentially. Meanwhile, core inflation accelerated to 3 percent on a year-on-year basis.

Higher inflation rate in the month has skewed the real policy rate into negative territory. These gains in inflation are believed to be narrow and transitory because they are concentrated only in a few categories, said ANZ in a research report.

There is no evidence of demand pull pressures on prices. Although, activity momentum has bolstered from lows of April-May but continues to be far off from full normalization. For instance, while PMI manufacturing number for June showed vase rebound.

“We expect headline inflation to average 1.7 percent in the second half of the year, a touch below the BSP’s 2–4 percent target band. We thus, reiterate our view that inflation will remain a non-issue for monetary policy for the remainder of the year”, added ANZ.