Inflation Preview: Back within target in September

Headline inflation settled below 2% in recent months, but food and energy inflation will bring us back within target.

Because of that, Metrobank sees headline inflation settling at 2.5% year-on-year in September.

Still no rise in rice prices

Early in the year, rice inflation was expected to revert to positive territory just before the 4th quarter. Recent data, however, indicate otherwise. Global rice prices continue to soften given record-high supply levels.

In the local space, rice prices also continue to drop amid the harvest season. In fact, Agriculture Secretary Francisco Tiu Laurel Jr. recently mentioned a possible extension of the two-month rice import ban which started in September.

The ban was put in place to help lift local palay prices and protect Filipino farmers from financial loss. Despite the ongoing import ban, sustained deflation in rice prices this month will continue to temper headline inflation.

Weather affects food prices

Food prices in September surged, mainly because of the strong storms that hit the country.

Prices for vegetables and fish shot up significantly, with vegetable prices seeing a particularly dramatic rise compared to last year’s weaker price base. Meanwhile, the price of meat continued its upward trend, albeit at a slower pace.

The price of fruits, however, remained relatively stable on a year-on-year basis, providing some relief.

A surge for power

Energy is also expected to provide upside pressure to September’s inflation rate.

While Meralco electricity prices were lower month-on-month in September, rates remained elevated compared to last year. Visayas Electric and Davao Light also saw higher prices for the month, attributed to powerplant outages across the country.

Meanwhile, the cost of unleaded gasoline and diesel in the National Capital Region (NCR) also rose in September, as geopolitical tensions and supply concerns persisted.

Metrobank’s Take

We forecast inflation to quicken to 2.5% year-on-year in September. Though rice inflation will remain in negative territory, food and energy will likely be the primary drivers of faster price growth for the month.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

MARIA KAILA BALITE is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. She holds a Master’s degree in Applied Economics and also majored in Financial Economics for her Bachelor’s degree, both from De La Salle University Manila. Outside of work, her interests include thriller movies, K-dramas, and dogs. 

JOAQUIM PANTANOSAS is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. He holds a BS in Statistics from the University of the Philippines-Diliman, where he developed an interest in quantitative research as a tool for complex problem-solving. He enjoys a good laugh with the people he cares about. 

JAMES NATHAN ANG is an intern in both the Investment Counselor Department and the Research and Market Strategy Department under the Institutional Investors Coverage Division at Metrobank. He is currently completing his Bachelor’s degree in Management of Financial Institutions at De La Salle University and hopes to work in the financial sector after graduation. His interests include exercising and traveling with his loved ones.