INFLATION zoomed to its fastest pace in over 13 years in September, as food, utilities and transport costs spiked.
Preliminary data from the Philippine Statistics Authority (PSA) showed headline inflation accelerated to 6.9% in September, from 6.3% in August and 4.2% in September 2021.
The latest inflation print matched the 6.9% logged in September and October 2018. It was also the fastest in more than 13 years or since the 7.2% in February 2009 at the height of the global financial crisis.
“If you recall in 2008 global financial crisis there were a lot of high inflation rates,” National Statistician Claire Dennis S. Mapa said during the briefing on Wednesday.
September also marked the sixth straight month that inflation breached the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target this year.
The latest headline figure was higher than the 6.7% median in a BusinessWorld poll conducted last week.
“The September 2022 inflation outturn of 6.9% is within the BSP’s forecast range of 6.6 to 7.4%, consistent with the BSP’s assessment of inflation remaining above target over the near term as price pressures broaden and signs of further adverse second-round effects emerge,” the central bank said in a statement.
On a monthly basis, headline inflation inched up 0.4% in September. Stripping out seasonal factors, inflation rose by 0.6% month on month.
This brought average inflation in the nine months to September to 5.1%, higher than 4% a year ago. However, it was still below the BSP’s 5.6% forecast for 2022.
Core inflation, which discounts volatile prices of food and fuel, eased to 4.5% year on year in September but still elevated from 2.6% a year earlier.
Out of 13 commodities, nine reported faster inflation in September.
Commodities that contributed to the faster headline inflation in September were the heavily weighted food and non-alcoholic beverages (7.4% annually from 6.3% in August); housing, water, electricity, gas and other fuels (7.3% from 6.8%); and transport (14.5% from 14.6%).
Inflation in the National Capital Region (NCR) jumped to 6.5% in September, from 5.7% in August, while inflation in the areas outside Metro Manila surged to 7% from 6.5% in the prior month.
Of the 17 regions in the country, nine posted inflation faster than the national average of 6.9%. It was led by Zamboanga Peninsula (9.6% in September from 9.1% in August), Davao Region (9.6% from 8.9%), and Caraga (8.2% from 7.5%).
Similarly, inflation as experienced by the bottom 30% income households climbed to 6.7% in September from 5.9% in August. It averaged 4.6% in the nine months to September, lower than 4.9% average last year. However, this segment still uses the consumer price index under 2012 prices compared with the rebased 2018 prices for the national inflation rate.
The National Economic and Development Authority (NEDA) said inflation has been accelerating not just in the Philippines but in other countries as well due to robust domestic demand, high commodity prices, supply chain disruptions, weather disturbances and the strong US dollar.
“The government’s priority is to make sure that there is sufficient and affordable food supply for every Filipino family,” NEDA Director-General and Socioeconomic Planning Secretary Arsenio M. Balisacan was quoted in the statement as saying.
Security Bank Corp. Chief Economist Robert Dan J. Roces attributed the higher inflation to the faster rise in prices of food and beverages, as well as housing, electricity and gas.
“The September print is the first full month where the impact of the [peso’s] depreciation to current levels were felt, along with initial price effects of the recent typhoons. As such, the country remains vulnerable to inflation shocks caused by exchange rate swings,” Mr. Roces said via e-mail.
The Philippine peso breached multi-year record lows in September. It traded to P57 levels against the US dollar for the first time on Sept. 6, and crossed the P58-to-a-dollar territory on Sept. 20. The local unit finished the month at P58.625 against the greenback.
Philippine National Bank (PNB) economist Alvin Joseph A. Arogo said in a separate e-mail the September inflation reflected the impact of the supply shortages “caused by the combination of the delayed effect of higher fertilizer prices and immediate disruption from Typhoon Karding,” as well as rising fuel and transport costs.
Latest government data showed Super Typhoon Karding caused over P3 billion in agricultural damage. Affected regions include Ilocos, Cagayan Valley, Central Luzon, Calabarzon, Bicol, Cordillera Administrative Region, and Western Visayas.
“Inflation is expected to remain elevated for the last quarter of 2022 with the recent fare hike and the impact of Typhoon Karding on food supply,” the Department of Finance (DoF) said in a statement.
The DoF said full-year inflation is still expected to fall within the 4.5-5.5% target by the interagency Development Budget Coordination Committee.
For its part, the BSP cited several upside risks that cloud the near-term inflation outlook, such as “potential impact of higher global non-oil prices, pending petitions for further transport fare hikes, the impact of weather disturbances on prices of food items, as well as the sharp increase in the price of sugar.”
PSA’s Mr. Mapa said October inflation may further rise due to the higher public transport fares that took effect this month.
“The transport commodity group, which carries 9% weight in inflation, we are seeing spillover effects on other subgroups, such as food. The PSA is monitoring this in our data collection, the fare hike in October and the rise in food prices,” Mr. Mapa said.
On Monday, the Land Transportation Franchising and Regulatory Board implemented fare hikes for public utility jeepneys and public utility vehicles, taxis, and Transport Network Vehicle Service.
“For inflation, we continue to expect a possible peak in the headline print this October before slowing in the final two months mostly on base effects,” Security Bank’s Mr. Roces said.
PNB’s Mr. Arogo said his average inflation forecast for the fourth quarter is 7.3%.
“The second-round effects of the global commodities spike earlier in the year and impact of the depreciation of the peso against the US greenback on imported products will likely still be felt in the coming three months. This is evidenced by the upward trend in the price growth in housing & utilities and restaurants & accommodation,” he said.
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco raised his average inflation forecast for 2022 to 5.4% from 5%, after the release of the September inflation data.
“The BSP won’t be sitting again until November and, if we’re right about September being the peak in inflation and the underlying sluggishness in the economy — the [third-quarter] GDP report is due before the next Board meeting — then an imminent pause in the tightening cycle will be play,” Mr. Chanco said.
The central bank said it is “prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term.”
The Monetary Board has raised rates by 225 bps so far since May. It will have its next policy-setting meeting on Nov. 17. — Bernadette Therese M. Gadon