Philippine headline inflation decelerates in July, likely to average 2.9 pct in 2019

Philippine headline slowed down in July. On a year-on-year basis, inflation decelerated to 2.4 percent from June’s 2.7 percent. The move shows slower growth in the ‘food and beverages’, housing and utilities’ and ‘transport’ components. On a sequential basis, inflation accelerated to 0.3 percent from June’s 0.1 percent. Food, ‘housing and utilities’ and ‘furnishings and household equipment’ added to the month, while lower transport prices provided some offset.

Core inflation slowed to 3.2 percent year-on-year in July from June’s 3.3 percent. Sequentially, core inflation came in at 0.25 percent. Rice and corn prices came down, being greatly responsible for the downward trend in food prices in recent months. Vegetable prices rose at a slower rate of 3.4 percent year-on-year in July although fruits have accelerated in the same period.

On an annual basis, headline inflation is expected to fall further in the months ahead, possibly below the 2 percent mark, noted ANZ in a research report. A high base might be a drag on inflation through the remainder of the year and slower growth momentum might keep a lid o 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 event this year as well as severe weather conditions during the typhoon season”, added ANZ.