By Katherine K. Chan, A reporter
RISING oil prices continued to weigh on food and utility costs, pushing annual inflation to 7.2% in April, the Philippine Statistics Authority (PSA) said on Tuesday.
Faster than expectedfnow putting more pressure on the Bangko Sentral ng Pilipinas (BSP) which had previously signaled that it would continue to raise interest rates as needed to curb inflation amid the oil crisis.
PSA data showed that the consumer price index (CPI) rose to 7.2% in April, up from 4.1% in March and 1.4% last year.
This was the fastest headline recorded since 7.6% in March 2023, and again above the central bank’s 5.6%-6.4% monthly rate.
It also beat the estimates of 17 analysts in the period BusinessWorld poll, where the median forecast was 5.5%.
Month-on-month, inflation rose to 2.6%, the fastest rate since the 3.4% recorded in January 2000.
National Statistician Claire Dennis S. Mapa noted that rapid price increases in food and non-alcoholic beverages, transportation, and utilities pushed the CPI higher last month.
April marked the second month in a row that headline printing accelerated past the BSP’s 2%-4% target.
As of April, inflation averaged 3.9%, which is below the upper end of the BSP’s full-year target.
Despite the fuel price reversal, transport inflation accelerated to 21.4% in April from 9.9% in March.
This is as fuel inflation rose to 59.6% in April from 27.3% last month and diesel to 122.7% from 59.6% revised in March. This was the highest reading for both petroleum products since the CPI was reset in 2018.
Last month, fuel retailers took advantage of the price cuts after a series of cuts since the Middle East war broke out in late February.
Month-to-month, the pump price adjustment stands at a net decrease of P0.58 per liter of gasoline, P28.18 per liter of diesel and P17.71 per liter of kerosene.
As of the end of April, the cost of gasoline is between P72.53 and P104.93 per liter, diesel from P75.93 to P101.96 per liter and kerosene from P125.39 to P147.98 per liter. These numbers were still significantly higher than last year.
Inflation for liquefied petroleum gas (LPG) increased to 45.8% in April from a revised 3.7% in March, as the government suspended excise duty on LPG and kerosene.
Inflation for housing, water, electricity, gas and others increased to 8.2% in April from 4.7% revised last month.
In April, Manila Electric Co. increased electricity rates by 53.35 centavos per kilowatt-hour (kWh), bringing the total price for the month to P14.3496 per kWh.
Higher fuel costs spilled over into food prices in April, reducing inflation in heavy food and non-alcoholic beverages to 6% from a revised 2.9% in March.
This was due to an 11.1% increase in grain and grain products inflation (from 3.6% in March); 9.4% in fish and other marine animals (from 6.6%); and 10.4% on vegetables, legumes, and the like (from 7%).
Meanwhile, rice inflation remained positive for the second consecutive month, rising to 13.7% from 3.6% last month.
Based on PSA data, the average cost per kilogram (kg) of local common milled rice increased by 15.95% to P51.53 in the second half of April from P44.44 last year. The price of finely milled rice also increased by 15.32% year-on-year to P58.88 from P51.06 per kilogram, while the price of special rice increased by 9.8% to P66.23 per kilogram from P60.32 per kilogram.
DIFFERENCE OF THE PESOS
Mr. PSA Mapa noted that the depreciation of the peso also increased inflation and weakened the purchasing power of the peso.
Last month, the local unit touched the P61-a-dollar level for the first time, falling to a new low of P61.567 against the greenback on April 29.
“Our diesel and gasoline are sold in US dollars, of course, and that’s why it had an impact on prices, which had a direct impact on our inflation rates and, of course, on the purchasing power of the peso,” said Mr. Mapa.
“Therefore, the impact of the weakness of the peso has had an impact on the price of inputs, especially those we export, and has had an impact on inflation rates, among others,” he added.
According to the PSA, the purchasing power of the peso, or the value of each P1, continued to decline to a new record of 73 centavos in April. This brings the value of P100 in 2018 to just P73 now.
PSA also reported that core inflation, which strips out fluctuations in food and fuel prices, rose to 3.9% in April from 3.2% in March and 2.2% last year. This was the highest primary print since 4.4% in December 2023.
In the National Capital Region (NCR), inflation rose to 5.5% in April from a revised 3.5% in March and 2.4% in the previous year.
Inflation in areas outside the NCR also accelerated to 7.7% in April, from 4.2% in the previous month and 1.2% in the previous year.
Meanwhile, inflation for the bottom 30 percent of income households rose at the fastest pace in three years to 8.5% in April, up from 4.2% in March and 0.1% in the same month last year.
In a statement, the Ministry of Economy, Planning, and Development said the administration is “reinforcing targeted interventions,” after inflation last month.
“Amid the conflicts in the Middle East that are disrupting the sale of fuel, the government is intensifying targeted interventions, especially to reduce the price pressure of food, energy, and transportation, while ensuring the continued stability of domestic supply,” said Economy Secretary Arsenio M. Balisacan.
WANT MORE MEASUREMENTS?
Meanwhile, Chinabank Research said the BSP may raise rates again but has limited room for aggressive tightening as rising inflation will weigh on economic growth in the near future.
Now the headline print projects to hold more than 7% in the coming months, with a full-year clip likely to end around 6%.
“We expect the BSP to raise rates further. However, high inflation will continue to weigh on consumption and growth, hindering the BSP’s ability to raise rates aggressively and placing a greater burden on the government to curb further inflationary pressures,” said Chinabank Research.
Chief Economist Rizal Commercial Banking Corp. Michael L. Ricafort said the BSP could extend its cycle of rate hikes, as in the 2022 oil crisis initiated by Russia.‘s invasion of Ukraine.
“It is possible that the BSP will raise the rate, similar to the previous cycle four years ago, in an effort to eliminate inflationary pressures during the growing period and better control inflation and prevent it from further…
At its April 23 meeting, the central bank ended its two-year rate-cutting cycle with a 25 basis point hike, bringing the key policy rate to 4.25%. This marks its first intensification since October 2023.
BSP governor Eli M. Remolona, Jr. said at the time that they could raise rates as needed to keep prices stable despite their expected impact on domestic growth.
The BSP sees inflation above 5% for most of the year to 6.3% by the end of 2026. This was higher than its previous forecast of 5.1%.
Meanwhile, Jose Enrique “Sonny” A. Africa, the executive director of the IBON Foundation, said the acceleration of inflation in April shows the lapse of time in the government’s response to the two-month energy crisis.
“The Marcos Jr. (administration) didn’t cause the oil shock, but its refusal to lower oil taxes and control oil company price gouging ensured that tens of millions of poor, low-income and middle-class Filipinos got the full brunt of it,” he said on Facebook on Tuesday.
“The latest inflation figures clearly emphasize that (the government‘s)reply is too slow, reaches too few, and gives too little,” he added.
