Inflation leaps to 12.2% in July, highest in 17 yrs

By Ruben Hortelano

08/06/2008

The inflation rate hit a higher-than-expected 12.2 percent in July, the highest in 17 years as prices of basic commodities increased overall, government data released yesterday showed.

The July figure was above the 11.2 percent to 12 percent forecast of the Bangko Sentral ng Pilipinas (BSP) and “was the highest since December 1991” when the rate topped 13.2 percent, the National Statistics Office (NSO) said.

Inflation in June was 11.4 percent, bringing the average rate for the past seven months to 8.3 percent, according to data released by the NSO.

High prices were felt mostly outside of the capital with the inflation rate outside the National Capital Region surging to 13.9 percent in July from 12.3 percent in June, NSO data showed.

Former Budget Secretary and University of the Philippines (UP) economist Benjamin Diokno said the fast clip in the increase in prices outside the capital showed government programs supposedly for the poor to be spared from the impact of high prices were not achieving targets.

Except for fuel, light and water, the rates for all commodity groups increased during the period, the NSO said.

The inflation rate for food, beverage and tobacco rose to 17.8 percent in July from 16.5 percent in June, while the figure for clothing rose to 4.5 percent from 4.2 percent, it said.

“The overall annual inflation rate for food alone further climbed to 18.6 percent in July from 17.4 percent in June,” it said, with Filipinos paying more for rice, the staple food.

Annual inflation rate in Metro Manila slowed to 8.6 percent in July from 9.2 percent in June which NSO attributed to prices of fuel, light and water leveling off.

“The slower annual inflation rate for food, beverages and tobacco index also contributed to the downtrend. The rest of the commodity groups either remained at its last month’s rate or moved up at higher rates,” it said.

Excluding selected food and energy items, core inflation slipped to 6.3 percent in July from 6.6 percent in June.

BSP Gov. Amando Tetangco Jr. said the inflation upsurge was expected due to the typhoons that hit the country during the period.

“As expected, inflation in July recorded another increase following the additional shock of typhoon Frank on food commodities,” Tetangco said.

He said the monetary policy “will continue to be appropriately tight until we see a more benign outlook and manageable inflation expectations.”

Tetangco’s statement gave indications the policy-making Monetary Board, which will meet before the end of the month, will likely raise interest rates by another 25 basis points.

The banks had incorporated the rate hike in bids for Treasury bills on Monday that led to the Bureau of Treasury to reject all offers for P3 billion worth of the benchmark 91-day Treasury bills.

Tetangco said inflation was “most pronounced in areas outside of Metro Manila.”

“Price movements of fuel, while remaining high, are beginning to show some easing,” he said.

He also reiterated that inflation is expected to peak by the fourth quarter.

Tetangco said proof that inflation is peaking was that core inflation that excludes certain food and energy items slowed to 6.3 percent in July from 6.6 percent in June.

Average inflation for the year, thus far was 8.3 percent, or within the BSP’s forecast for an average inflation rate of 9 percent to 11 percent this year.

The BSP previously saw inflation averaging lower from 7 percent up to only 9 percent this year.

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