STABLE FOOD PRICES PARTIALLY MODERATE JUNE INFLATION

MANILA—The National Economic and Development Authority (NEDA) said that prices of food commodities were stable in June 2013 despite higher petroleum prices for the said month.

This statement came after the National Statistics Office (NSO) reported that headline inflation last month was recorded at 2.8 percent.

“The inflation rate in June 2013 was mainly driven by higher petroleum prices following the increase in the price of oil in world markets and the peso depreciation during the period.  However,  stable food prices on the back of abundant supply partially moderated the increase in inflation,” said Socioeconomic Planning Secretary Arsenio M. Balisacan.

Inflation rate is the percent increase in the prices of goods and services commonly purchased by households, as measured by the Consumer Price Index (CPI).

Balisacan noted that inflation rate for food and non-alcoholic beverages remained at 2.4 percent in June 2013.  This was due to slower changes in the price of corn (3.8% in June 2013 vs. 5.7% in May 2013), meat (2.2% vs. 2.4%), milk, cheese and eggs (1.7% vs. 2.1%), fruits (4.6% vs. 5.2%), sugar, jam, honey and confectionery (0.1% vs. 0.7%), and oils and fats (-7.8% vs. -7.5%).

For the first six months of 2013, inflation rate was still below the government’s target.

“The average inflation rate for the first half of 2013 settled at 2.9 percent.  This is slightly below the low-end of the Development Budget Coordination Committee (DBCC)’s inflation target of 3.0 to 5.0 percent for 2013,” said Balisacan, who is also NEDA Director-General.

The Cabinet official said that the June 2013 inflation was prompted by the significant price adjustments in electricity, gas and other fuels (0.4%) and transportation related commodities and services (0.7%).  In May 2013, these commodity groups previously had price contractions (-0.4% and -0.5%, respectively), he said.

“This is consistent with the higher international price of Dubai crude during the period.  The increase was driven by uncertainties in the international market due to social unrest in Syria,” said Balisacan.

He added that the peso depreciated by 3.9 percent in June 2013 compared to the previous month, as investors pulled back their investments in emerging economies and shifted to United States (US) instruments.

“This was in reaction to the announcement made by US Federal Reserve Chairman Ben Bernanke that the US’ stimulus policies could possibly wind down later this year due to an improving US economy.  However, the peso started to gain strength in the latter part of June 2013 following the slower-than-expected growth of the US economy,” said Balisacan.

The NEDA official said that apart from stable food prices, the lower price of electricity also tempered the gains in oil prices in June.

Citing industry data, Balisacan noted that the generation charge of the Manila Electric Company (Meralco) registered an annual decline of 7.8 percent to PhP5.66 per kilowatt hour in June 2013.

“The decrease in generation charges during the period is still attributed to the newly approved rates by the Energy Regulatory Commission (ERC) under the new Power Supply Agreement (PSA) of Meralco, which enables the electric company to purchase power from suppliers with lower costs,” he explained.

Meanwhile, core inflation further eased to 2.9 percent in June 2013, according to the NSO.  This was slower relative to the 3.0 percent rate in May 2013 and 3.7 percent rate in June 2012.

Core inflation represents a more long-term inflation trend, as it excludes certain items that have short-term and volatile price movements.

M.R. No. 2013-061                                                                                    
05 July 2013