The easing prices of energy and transport costs caused the country’s headline inflation to decrease slightly to 3.7% in June from the 3.9% in May, beating the upper end forecast of the Bangko Sentral ng Pilipinas (BSP).

Also, while remaining in double digits, rice inflation for June settled at 22.5 percent from 23 percent in May. To recall, rice inflation reached its peak of 24.4% in March, which was the height of the El Nino weather disturbance.

The latest inflation figure is also within the 2% to 4% target of government economists, while the BSP earlier forecast a 3.4% to 4.2% inflation rate.

Meanwhile, the inflation rate for May was at 3.9% or slightly higher than the 3.7% in April.
In a press briefing on Friday, PSA Undersecretary and National Statistician Dennis Mapa said that the inflation rate for June this year is lower than the 5.4% of the same month last year. Year-to-date headline inflation was at 3.5%.

“The downtrend in the overall inflation in June 2024 was primarily influenced by the slower annual increment of housing, water, electricity, gas and other fuels at 0.1 percent during the month from 0.9% in May 2024,” the PSA said.

“Also contributing to the downtrend were the slower annual increases in the indices of transport with 3.1% in June 2024 from 3.5% in May 2024, and restaurants and accommodation services with 5.1% inflation in June 2024 from 5.3% inflation in the previous month,” it added.

The PSA further said that lower annual increments were noted in the indices of the following commodity groups during the month:

1. Alcoholic beverages and tobacco, 3.8% from 4.2%;
2. Clothing and footwear, 3.2% from 3.4%;
3. Furnishings, household equipment and routine household maintenance, 2.8% from 3.1%; and
4. Personal care, and miscellaneous goods and services, 3.2% from 3.4%.

Meanwhile, the index of food and non-alcoholic beverages exhibited a higher annual increase of 6.1% during the month from an annual increment of 5.8% in May 2024.
Rice inflation, a major driver of headline inflation, slightly eased to 22.5 percent from 23 percent in May due to the reduction in the prices of well-milled rice.

“We have a big reduction… about 20 centavos per kilogram (kg) in well-milled rice, so we have a -0.2 percent reduction for that particular commodity, so we have a slight reduction in the overall inflation,” Mapa said.

“The one that contributed in terms of prices basically is the price for the well-milled rice,” he added.

Mapa said the average price per kg. of well-milled rice went down to P55.96 from P56.06 in May.

INFLATION SHIFTING TO THE DOWNSIDE

For its part, the BSP said the June inflation of 3.7% is within its forecast range of 3.4% to 4.2%.

“The latest inflation outturn is consistent with the BSP’s latest outlook that inflation will settle within the target range for 2024-2025 with inflation expectations remaining well-anchored,” it said.

The BSP noted that the balance of risks to the inflation outlook shifted to the downside for 2024 and 2025 due largely to the impact of lower import tariffs on rice under Executie Order 62.

“Nonetheless, higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation,” it said.

The BSP said the Monetary Board supports the national government’s implementation of the reduction in the tariff on rice imports to address supply-side pressures on prices and sustain the disinflation process.

“Moving forward, the BSP will ensure that monetary policy settings remain in line with its primary mandate to safeguard price stability conducive to sustainable economic growth,” it said.

(Graphic from PSA)