The headline inflation picked up for the straight month in May on the back of higher transportation and electricity costs during the month, the Philippine Statistics Authority (PSA) said on Wednesday.

Preliminary data from the PSA showed that the headline inflation rate, or the pace of increase in the prices of goods and services, increased to 3.9 percent last month from 3.8 percent reported in April, but lower than the 6.1 percent reported in May 2023.

May's inflation print also falls within the Bangko Sentral ng Pilipinas' (BSP) upper band of the forecast range of 3.7 percent to 4.5 percent.

Year-to-date, the average inflation rate for the first five months of the year reached 3.5 percent.

Core inflation, which excludes volatile goods like food and gasoline, decreased to 3.1 percent in May from 3.2 percent in April.

In a press briefing, National Statistician and PSA chief Claire Dennis Mapa said the primary drivers of acceleration in inflation included housing, water, electricity, gas, and other fuels (from 0.4 percent in April to 0.9 percent in May) and transport (from 2.6 percent to 3.5 percent).

Mapa said Luzon and Visayas grids being placed on red and yellow warnings may have caused the electricity bills to increase last month.

"That’s possible, because of course if you have higher demand, compared to supply, that would trigger some adjustments in the prices upward," he said.

Mapa pointed out that the average cost of power for a monthly use of 120-kilowatt hours was P1,404.60 in May versus P1,384.35 in April.

The National Statistician also attributed the increase in transport inflation to the faster increase in the prices of gasoline at 5.2 percent last month from 3.4 percent last April and diesel at 7.2 percent last May from 4.2 percent the previous month.

Food, rice inflation

On the other hand, food inflation decreased from 6.3 percent in April 2024 to 6.1 percent in May.

Food inflation was 7.5 percent in May of last year.

Rice inflation continued its downward trend in May, falling to 23 percent from 23.9 percent, coinciding with recent declines in global prices.

This was due to a decrease in prices for most rice sub-commodities, including regular and special varieties, during the month.

The statistician noted, however, that rice prices could decrease by P6-7 per kilo due to tariff reductions.

The National Economic and Development Authority (NEDA) Board has decided to lower rice tariffs from 35 percent to 15 percent until 2028, as part of the government's efforts to make the staple grain more affordable.

"The tariff reduction is significant. Our estimate, a very quick estimate, on the impact on the price per kilo, assuming all things remain the same, from the reduction of the tariff is about P6-7. This is based on a very quick computation," Mapa said.

"That would have a large impact on rice inflation and the overall inflation," Mapa added.

Despite the continuous inflationary trend of rice, Mapa observed a decrease in the average global rice price, especially in nations such as Thailand and Vietnam.

This, in turn, influences retail prices in the Philippines.

"Continuously, the average world price of rice has been declining in countries such as Thailand and Vietnam. In terms of world prices, it is going down so that's why we're seeing also a slight decrease in the retail price of rice in the country," Mapa said.

According to the Department of Agriculture (DA) price watch, well-milled rice was sold in public markets for P48 to P55 per kilo on the last day of May, while regular milled rice ranged from P45 to P52 per kilo.

At the beginning of the month, the DA observed prices ranging from P49 to P50 per kilo for regular milled rice, with the average remaining consistent throughout the month for well-milled rice.

In a Viber message, Rizal Commercial Banking Corp. chief economist Michael Ricafort said preparations and other non-monetary measures such as increased importation of rice, pork, meat and other agricultural products during lean months to stockpile would help mitigate the adverse effects of El Nino and La Nina.

"Provided no escalation of geopolitical risks particularly on the Israel-Iran/Hamas/Houthi/other proxies war and the potential effects on world oil prices, also provided no large storm/El Nino drought damage that tends to increase food prices, headline inflation could still be well within the 2%-4% BSP inflation target in 2024," Ricafort said.