Connect with us

Hi, what are you looking for?


Inflation eases to 6-month low in June

Inflation slipped to the lowest level in six months in June. — PHILIPPINE STAR/ MICHAEL VARCAS

PHILIPPINE INFLATION eased to a six-month low in June following three straight months of steady price increases, the Philippine Statistics Authority (PSA) said on Tuesday.

Preliminary data from the PSA showed headline inflation at 4.1% in June, slowing from the year-on-year rate of 4.5% in May. However, this was still above the 2.5% recorded in June last year.

The latest headline figure is lower than the 4.3% median in a BusinessWorld poll conducted late last week. Nevertheless, it fell within the 3.9%-4.7% estimate given by the Bangko Sentral ng Pilipinas (BSP) for June.

The June print was also the slowest in six months, or since the 3.5% annual rate recorded in December 2020. Prior to the June result, year on year inflation remained unchanged for three straight months at 4.5%.

Year-to-date inflation settled at 4.4%, still above the BSP’s 2%-4% target this year and above the forecast of 4% for the entire year.

Core inflation, which discounted volatile prices of food and energy items, stood at 3%. This was slower than the 3.3% recorded in the previous month, but was steady from the rate recorded in the same month last year. Core inflation averaged 3.3% so far this year.

The PSA attributed the slowdown in June primarily to the lower annual rate of increase in the transport index at 9.6% from 16.5% in May. Other commodities that saw slower price increases include alcoholic beverages and tobacco at 11.2% from 11.8% in May, clothing and footwear at 1.6% from 1.7%, health at 2.9% from 3.2%, and communication at 0.2% from 0.3%.

The heavily weighted food and non-alcoholic beverages inched up to 4.7% in June from 4.6%.

Similar to the headline inflation result, the inflation rate for the bottom 30% of income households eased to 4.3% in June from 4.5% the previous month. This was still, however, faster than the 3% print in June 2020.

The inflation rate for the bottom 30% takes into account the spending patterns of this income segment. Thus, its consumer price index differs from that of the average household with the former assigning heavier weights on necessities.

In a statement, the National Economic and Development Authority (NEDA) attributed the easing inflation in June to government policies enacted to drive food prices down, particularly that of meat.

Food inflation stood at 4.9%, unchanged from May, but still higher than the 2.7% posted in June last year.

The annual price increases for meat and milk, cheese, and eggs slowed to 19.2% and 1%, respectively, from 22.1% and 1.4% in May.

Meanwhile, annual declines were observed in rice (-1.1% in June from -0.8% in May), fruits (-0.6% from -1.1%), and vegetables (-2.7% from -6.6%).

Bucking the trend slightly were faster price increases in fish (8.7% from 7.8%); corn (5.3% from 5.1%); oils and fats (4.2% from 4%); sugar, jam, honey, chocolate and confectionery (1% from 0.9%), and food products “not elsewhere classified” (1.4% from 1.2%).

“The declining meat inflation points to the positive effects of Executive Orders (EO) 133 and 134. These are expected to further bring down meat prices during the second half of the year,” Socioeconomic Planning Secretary Karl Kendrick T. Chua was quoted in the NEDA statement as saying.

President Rodrigo R. Duterte signed EOs 133 and 134 that increased the quota of pork imports and modified the tariff rates on imported pork products, respectively.

NEDA also cited other government interventions such as hog repopulation programs, the zoning and vaccine development amid the African Swine Fever (ASF), and the signing of EO 135 which lowered the tariff on rice imports to 35% from 40% for a year.

To recall, Mr. Duterte declared a one-year state of calamity on May 10 due to the ASF outbreak.

NEDA also noted the downtrend in transport inflation, but said the costs of transport services “remain elevated” due to physical distancing measures and the recovery of global oil prices.

“This is expected to partially decrease in the near term with the government’s accelerated vaccination program,” NEDA said.

Economists expect inflation to be on the downtrend in the next few months, but flagged risks to the outlook such as elevated global oil prices and the peso’s depreciation that will contribute to inflationary pressures due to the rise in import prices.

Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said their full-year inflation forecast was lowered to 4.3% from 4.5% despite the “upside risks” that may keep inflation above 4% in the coming months.

“Despite the reduction in pork tariffs, the price of pork has not shown a substantial decline. Moreover, oil companies have announced several oil price hikes in recent weeks and could translate to less favorable base effects for transport,” Mr. Neri said in an e-mail.

“Aside from inflation, another factor that could challenge the BSP’s ability to keep interest rates steady is the hawkish tilt of the Federal Reserve. The US central bank recently provided a timeline on when it could possibly hike its interest rates, hinting that it could happen in 2023. This means there is a chance that the Fed could start tapering its bond purchases in 2022,” he added.

Mr. Neri also pointed to the possibility of “monetary adjustments” in the coming months as the peso reached the P49-per-dollar level — its weakest in nearly a year.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also pointed to the peso as an “offsetting risk factor for inflation” as it “would gradually lead to some pick up in import prices and overall inflation,” he said in a text message.

Nevertheless, Mr. Ricafort expects monetary policy to remain accommodative in terms of keeping the key interest rate at the record low 2% “as long as necessary, with a possible cut in large banks’ reserve requirement ratio from the current 12%…”

In a statement, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the probability of inflation hitting 5% this year “has diminished considerably” with BSP expected to “only consider adjusting policy by mid-2022.”

“With price pressures fading, we expect inflation to decelerate in the second half of the year as meat prices normalize with authorities allowing higher import volume for the commodity. Meanwhile, base effects tied to social distancing guidelines for transport and other services are also likely to fade in the coming months, offsetting a projected acceleration in utility and fuel costs given the surge in global oil prices,” Mr. Mapa said.

In an e-mail, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said inflation will likely be “slightly over” the BSP’s 2%-4% target range for this year with further easing to occur next year.

“Expect upward pressure on price levels due to oil price increases, but we maintain our view that subdued demand due to limited reopening of the local economy. This may counter the expected rise in fuel prices overall,” he said. — B. T. M. Gadon

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global plastic pollution treaty, weeks...


By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded its growth forecast for the Philippines for this year and 2023, citing an “accommodative”...


THE PHILIPPINE auto industry’s sales recovery will likely be derailed if a measure reimposing excise taxes on pickup trucks is signed into law, according...


THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected to...


THE ASIAN Development Bank (ADB) is planning to allocate at least $14 billion for a program aimed at easing a food crisis in the...


With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


The minute that any question pops into your head, you can simply ask Google. No longer do we have to pour over books and...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...


Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.