Inflation up 1.6% in May, highest this year

MANILA, Philippines – Inflation rose 1.6% in May 2016, hitting its highest level in a year and up from 1.1% in April, according to data released by the National Economic and Development Authority (NEDA) on Tuesday, June 7.

“The increase in inflation can be attributed to higher demand due to election spending and partly to supply constraints in agriculture because of the residual effects of the weakening El Niño,” said Socioeconomic Planning Secretary Emmanuel Esguerra.

May inflation was above the market expectation rate of 1.4% but fell within the Bangko Sentral ng Pilipinas (BSP) forecast of 1.1-1.9% for the month.

Core inflation, which excludes volatile prices of energy and food, increased to 1.6% compared to the previous month and the 1.5% in May 2015.

Last month’s headline figure also matched the previous peak recorded in May 2015. In the period between that, the inflation rate dipped to as low as 0.4%, recorded in September and October 2015.

Despite this, Esguerra said that “the manageable inflation rate for the first 5 months of 2016 is expected to continue for the rest of the year as the productive capacity of the domestic economy expands and oil prices remain low.”

“The stability in inflation rate will create a positive environment for investments and ensure affordability of basic commodities for the poor,” Esguerra added.

NEDA expects full-year inflation for 2016 to be close to the lower bound of the 2.0 – 4.0% inflation target set by the Development Budget Coordination Committee.

Food and oil up

The prices of food and oil led the increases in May, with prices in the food subgroup rising by 2.3%.

The price of rice also rose by 0.1% month-on-month for the first time in 8 months although they remain lower than in the previous year.

Esguerra pointed out that the timely importation of rice to offset domestic production losses due to El Niño mitigated the possible skyrocketing of rice prices.

Oil prices also surged in May, with gasoline up 4.83%, liquefied petroleum gas up 3.21%, diesel up 15.07%, and kerosene up 7.61%.

Global oil prices hit 8-month highs this week, pushing past $50 driven by a weaker dollar and unplanned disruption in production in Nigeria and Canada which has lowered supply.

Esguerra stressed that the government must remain vigilant in mitigating the enduring effects of El Niño while preparing for the likely occurrence of La Niña in the second half of the year.

“The government must accelerate the implementation of the Roadmap for Addressing the Impact of El Niño, especially in areas that have declared a state of calamity. In addition, it must stay alert and prepared for disasters that could ensue with the occurrence of La Niña,” he said. – Rappler.com