INFLATION slowed for a sixth consecutive month in July, the Philippine Statistics Authority (PSA) reported on Friday, owing mainly to a slower increase in housing, water, electricity, gas, and other fuels.
The 4.7 percent, down from 5.4 percent in June and July of last year at 6.4 percent, fell within the Bangko Sentral ng Pilipinas’ (BSP) 4.1 to 4.9 percent forecast for the month.
It is, however, slightly lower than the 4.8-percent median in a Manila Times poll of economists.
This is also the lowest recorded inflation since March 2022, at 4 percent, the PSA said.
Core inflation, which strips out volatile food and energy items, significantly dropped to 6.7 percent from 7.4 percent in June.
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Year to date, headline inflation stood at 6.8 percent, while core inflation was at 7.6 percent. It remained well over the central bank’s 2- to 4-percent target.
“The continued downtrend of overall inflation in July 2023 was primarily brought about by the slower year-on-year increase in housing, water, electricity, gas and other fuels at 4.5 percent during the month from 5.6 percent in June 2023,” the PSA said.
“The slower annual increment observed in the heavily weighted food and non-alcoholic beverages at 6.3 percent in July 2023 from 6.7 percent in the previous month also contributed to the downward trend of headline inflation,” it added.
“The third main source of deceleration was transport, recording a faster annual decrease of -4.7 percent during the month from -3.1 percent in June 2023.” The PSA noted that the higher inflation rate seen in the index of education services had a faster year-on-year increase at 3.7 percent during the month from 3.6 percent last June.
The indices of the rest of the commodity groups retained their respective previous month’s annual growth rates.
Food inflation eased to 6.3 percent in July from 6.7 percent in June. This was primarily due to an annual decrease in meat and other parts of slaughtered land animals at -1.7 percent during the month from 0.3 percent in the previous month.
Inflation for fish and other seafood slipped to 4.5 percent in July from 6.2 percent in June, the PSA said.
“Also contributing to the downtrend of food inflation in July 2023 was the slower year-on-year growth of sugar, confectionery, and desserts at 21.4 percent during the month from 28.9 percent in the previous month,” it said.
Despite the continued downtrend, Socioeconomic Planning Secretary Arsenio Balisacan advised caution as “we face increasingly volatile weather disturbances as well as external headwinds such as oil price increases and trade restrictions on food.”
Balisacan said the government has been proactive in its efforts to mitigate the potential long-term effects of the current weather disturbances on inflation and the economy throughout the year.
He said the government has taken decisive measures to allocate resources to the affected regions, and prepared both policy and on-the-ground responses in anticipation of further typhoons and weather disruptions caused by El Niño.
“The government will implement necessary measures to prevent price spikes, protect the purchasing power of Filipino families, and sustain our economic recovery and momentum,” he said.
The BSP said the 4.7 percent result is consistent with its projection that inflation will gradually return to the target range by the fourth quarter of this year in the “absence of further supply shocks.”
The central bank said that inflation risks are tilted upwards due to potential factors like increased transport fares, higher minimum wage adjustments in other regions, supply constraints for key food items, the El Niño, and possible knock-on effects of higher toll rates on agricultural prices.
“Meanwhile, the impact of a weaker-than-expected global economic recovery remains the primary downside risk to the outlook,” it added.
It expressed its readiness to adjust the monetary policy stance “as necessary to prevent the further broadening of price pressures as well as the emergence of additional second-order effects in view of the persistent upside risks to the inflation outlook.”
“The BSP also continues to support the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation,” it said.