PSA: Inflation eases to 3.7% in June

The rate of growth in the prices of goods and services slightly eased in June after four consecutive months of increasing inflation, which strengthens the case for the central bank to begin relaxing monetary policy as early as August.

Data released by the Philippine Statistics Authority on Friday showed that inflation decreased to 3.7 percent in June 2024, slower than the 3.9 percent reported in May 2024 and the 5.4 percent in June 2023.

The most recent inflation print dodged the Bangko Sentral ng Pilipinas' prediction of a breach by up to 4.2 percent during its latest inflation forecast for June.

Year-to-date, average inflation is 3.5 percent. Additionally, the latest data was the seventh consecutive month that inflation fell below the 2 to 4 percent annual goal range set by the BSP.

Core inflation, which excludes volatile food and energy prices, came in at 3.1 in June from a year earlier, unchanged from May.

In a press briefing, National Statistician and PSA chief Claire Dennis Mapa attributed the inflation slowdown in June to a slower price increase in transport (from 3.5 percent in May to 3.1 percent in June) and electricity prices (at -13.7 percent in June from -8.5 percent in May).

Mapa said transportation inflation slowed to 3.1 percent from 3.5 percent as a result of decreased rates of inflation for gasoline and personal transportation.

Restaurants and lodging services saw a 5.1 percent inflation rate in June, which was lower than the previous month's 5.3 percent.

Rice prices and the broader food and beverage sector continue to dominate overall inflation, with 61.9 percent share or 2.3 percentage points.

While rice inflation decreased from 23 percent in May to 22.5 percent in June, it still accounted for 45.2 percent of total inflation due to the reduction in the prices of well-milled rice.

Mapa said the average price per kg. of well-milled rice went down to P55.96 from P56.06 in May.

"We have a relatively significant reduction... about 20 centavos per kilo in well-milled rice, resulting in a -0.2 percent reduction for that particular commodity, which has led to a slight reduction in the overall inflation. The one that contributed in terms of prices basically is the price for the well-milled rice," Mapa said.

Mapa also mentioned that the government’s rice tariff cut has not yet impacted prices, noting that they will also have to consider headwinds such as the exchange rate and world prices.

“But definitely the reduction in the tariff, all things being the same, we would expect that there will be a reduction in the price of rice,” Mapa said.

The latest inflation figures support BSP Governor Eli Remolona's indication from last week that a rate drop in August is now marginally more likely than it was.

His remarks came as the benchmark rate continued to hover at its highest point in 17 years, indicating evidence of difficulties in domestic demand.