Analysts see slightly higher inflation for Oct

ANALYSTS expect inflation to have edged up last month due to higher food and electricity costs and a weaker peso.

The median forecast in a Manila Times poll was 1.8 percent, a slight increase from the September result of 1.7 percent and within the Bangko Sentral ng Pilipinas’ (BSP) 1.4- to 2.2-percent estimate for the month.

If realized, inflation will have fallen below the central bank’s 2.0- to 4.0-percent goal for an eighth straight month.

Data for October will be released by the Philippine Statistics Authority on Wednesday, Nov. 5.

Both Union Bank of the Philippines chief economist Ruben Carlo Asunsion and Pantheon Macroeconomics economist Miguel Chanco, who had the lowest forecasts of 1.6 percent, said inflation could have slowed due to more modest price adjustments.

“Mild upward pressure from supply constraints and import suspension, partly offset by government price controls,” Asuncion said, noting that “base effects” also would have contributed to the possible decline.

Chanco expects food inflation to have fallen but offset “partially by a rise in housing and utilities inflation.”

Chinabank Research, meanwhile, estimated inflation to have stayed at 1.7 percent, citing upward pressures from higher rice prices following the suspension of imports along with increases in fish, vegetable and fuel costs.

“However, these were partly offset by lower costs of meat, fruits, sugar, LPG (liquefied petroleum gas) and electricity,” it said.

Meanwhile, Rizal Commercial Banking Corp. chief economist Michael Ricafort, Bank of the Philippine Islands senior economist Emilio Neri, RSBC Global Research economist Aris Dacanay and Sun Life Investment Management and Trust Corp. economist Patrick Ella all said inflation could have slightly increased to 1.8 percent.

Ricafort said this was due to base effects and the damage caused by typhoons, which would have pushed up food prices.

Neri, meanwhile, said inflation was driven by higher prices of rice, vegetables and fish. Rising electricity rates and a weaker peso also added pressure though lower meat, fruit and oil prices helped offset these increases.

“Going forward, upside risks to inflation are building as favorable rice base effects fade and the extension of the rice import suspension through year-end adds further pressure,” Neri said.

Dacanay said some inflationary pressures remained, including higher vegetable prices due to recent typhoons. He added that electricity costs also rose as the peso’s depreciation against the dollar led to higher generation charges.

“However, downside price pressures also persisted, the biggest coolant being rice,” he said.

Metrobank Research, meanwhile, estimated inflation to have hit 1.9 percent, just below the lower end of the BSP’s target range, as continued rice deflation offset moderate increases in electricity costs.

“Rice prices continue to fall steadily, both monthly and annually, amid an oversupply,” it said.

Emmanuel Lopez of the University of Santo Tomas Graduate School, who gave the highest forecast of 2.0 percent, said inflation likely rose further due to the continued increase in fuel prices that would have raised production costs.

He added that rising electricity and water rates, along with the peso’s depreciation against the dollar, would have driven up the cost of imported goods.