Inflation Preview: Still muted amid the storm

Annual consumer price rise may have slowed in July, even as bad weather pushed some food prices higher.

While weather disturbances brought supply-side pressure, high base effects could mute these. Metrobank forecasts that July inflation will settle at 1.1% year-on-year, compared with 1.4% the previous month.

Storm eats up produce

Meat, fish, vegetable, and fruit prices rose year-on-year in July, as bad weather conditions curbed supply. The Department of Agriculture estimates that tropical storm Crising and the southwest monsoon have led to PHP 134.7 million in losses in the farm and fisheries sectors.

However, negative rice inflation will continue to partially offset price pressure from other agricultural commodities.

Energy relief

Fuel prices moved both directions in July, with three consecutive price cuts early in the month followed by two consecutive hikes.

Global oil prices remain volatile due to economic uncertainty and the Organization of the Petroleum Exporting Countries’ recent decision to increase production. Despite this, local fuel pump prices remain lower than in the same month last year. We expect oil inflation to remain negative in July.

Meanwhile, electricity rates saw mixed movements in July after Manila Electric Company increased charges, despite Davao Light and Visayan Electric reducing rates. Given mixed movements, electricity inflation is expected to be relatively slower compared to the previous month.

Metrobank’s take

While supply side pressure from the agriculture sector may prompt inflation higher, this will be largely offset by negative rice and energy inflation.

(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.