Philippine inflation eases to 0.9% in September

The decline marks the first time in 40 months that the rate fell below the 1% mark.

The Philippine inflation rate fell 0.9% in September from 1.7% in August, marking the first time in 40 months that the rate went below the 1% level, UOB Markets Research reports.

UOB reckons that the dip is due to the downward trend across prices of rice, corn and vegetables, electricity and fuel in the Philippines.

Prices of food and beverage declined for the first time since January 2012 with 0.6% YoY in August from the previous 0.9%, attributed to the decline in the price of rice, from August’s -5.2 % YoY to -8.9% in September, decline in the price of corn, falling from August’s -5.2 % YoY to -8.9% in September, as well as prices in corn inching down to -4.1% September YoY from -3.7% in August, and also with vegetable with a current -4.7% YoY inflation from August’s -1.4%.

Housing, utilities and other fuels price inflation moderated to a more than three-year low of 0.8% YoY from August’s 1.8% on the back of a downward adjustment in electricity rates.

As a result of declining fuel prices, the transport segment recorded a price deflation for the second month with - 0.9% YoY from -0.2% in August.

The retail prices of petrol RON95 dropped for five months in a row by 9.6% YoY to an average of US$1.02 (PHP52.78) per litre from August’s -7.2% YoY to US$1.01 (PHP51.97) per litre, whilst the pump prices of diesel declined for the fourth month by 8.4% YoY to an average of US$0.83 (PHP42.68) per litre from August’s -5.1% YoY to US$0.81 (PHP41.99) per litre.

All these fully offset the consistent increase in alcoholic beverages and tobacco price inflation which rose to 14.3% as of September YoY from 10.1% in August, and tobacco’s inflation increasing to 18.7% in September YoY from August’s 12.8%.

Core inflation stayed above the five-year moving average level at 2.7% YoY in September, despite easing further from 2.9% YoY in August, suggesting that domestic demand will be resilient, supportive of GDP growth in the near term.

UOB forecasts that headline inflation will continue to stay below the 2.0% level over the next two months before rebounding significantly in December and into 2020 as the favourable base effects will fully fade.

UOB forecasts that full-year inflation will be at 2.5% for 2019 and 3.0% for 2020.