May inflation drops to 1.6%, lowest in 20 years

MANILA, Philippines – The government announced that inflation, or the rate with which prices of goods and services increase, hit its lowest in 20 years: 1.6% in May 2015.

The National Economic and Development Authority (NEDA) reported on Friday, June 5, that May’s inflation was 0.6% lower than April’s 2.2%, explaining that sufficient supply of food staples such as rice and meat, decreased electricity rates, and lower food prices eased inflation last month to its lowest in 9 years.

“Using the current base year 2006, the May 2015 inflation rate is the lowest, covering the monthly inflation series from 1995 to May 2015. It was also below the market expectation of 2%,” explained Rolando G. Tungpalan, NEDA officer-in-charge (OIC) and deputy director-general.

Year-to-date, headline inflation by end-May 2015 averaged at 2.2%, still within the inflation target range of 2% to 4% set by the government for the year. The Bangko Sentral ng Pilipinas (BSP) reported in April that the first quarter inflation for 2015 eased at 2.4%, remaining within the government target range of 3% ± 1-percentage point.

The latest inflation report gives BSP more reason to cut interest rates. It also offsets dampening gross domestic product growth, exports, and government underspending figures, Reuters said.

Core inflation (which shows long-term trend at the price level), excluding selected volatile food and energy prices, was down to 2.2% from 2.5% in April 2015 and 3.1% in May 2014. Core inflation in the first 5 months of 2015 averaged at 2.5%.

Also, the May 2015 inflation slowdown appeared to be geographically broad-based, as the price index in the National Capital Region (NCR) slid to 0.7% in May 2015 from 1.5% in April 2015, and 3.8% in the same period a year ago.

All regions except Region X (Northern Mindanao) registered slower year-on-year price increases, resulting in a tempered overall inflation of 1.8% in May 2015 for areas outside NCR – from 2.3 % in April 2015 and 4.7% in May 2014.

Slower price adjustments

Inflation in the food sub-group eased in May 2015 at 3.2% from 4%, following slower price adjustments in rice, meat, fish, and fruits, the Philippine Statistics Authority (PSA) reported.

Rice prices have normalized, as total rice stocks inventory grew by 16.5% year-on-year as of April 2015.

“With favorable weather conditions, the supply of fish has been steady and sufficient and the volume of in-season fruits in the market stable,” the NEDA official said.

He added that inflation in the meat index was also curbed, following the Department of Trade and Industry’s imposition of a lower suggested retail price.

Non-food inflation also moderated in May 2015 at 0.3% from 0.8% due to a sustained decline in the prices of electricity, gas, and other fuels.

Manageable

Tungpalan said that inflation remained low and stable in the first 5 months of 2015.

“This bodes well for household consumption,” he said.

Tungpalan also gave assurances that overall, policies remain supportive of a manageable inflation rate.

“With the country’s strong external position, the peso is expected to remain relatively stable and this will contribute to stable domestic prices going forward,” he said.

Risks remain though despite low inflation figures, as El Niño in the country may likely continue until early 2016.

Tungpalan said the government should be keen in monitoring drought in agricultural areas and be ready to assist farmers should there be a need to shift to crops that are less dependent on water and resilient in a high temperature climate. – Rappler.com

 

Rice meal, electric meter, gasoline pump images from Shutterstock