HSBC: June inflation likely at 1.5%

HSBC projects overall inflation in June to slightly accelerate to 1.5 percent from 1.3 percent in May due to higher meat prices, while rice and electricity prices declined.

“June inflation had a lot of moving parts — parts that moved in different directions,” said HSBC economist for Southeast Asia Aris Dacanay.

He said prices of dressed whole chicken rose from P198 to over P200 amid the spread of bird flu in Europe.

To prevent faster inflation due to supply shortage, the Department of Agriculture approved on 19 June the re-importation of poultry from the Netherlands after bird flu was contained in other European countries, namely Belgium and Germany.

Pork has also been sold at higher prices as the supply of local hogs is being diminished by the African swine fever, forcing vendors to import pork.

Agriculture Secretary Francisco Tiu Laurel Jr. said some imported pork has been selling at P450 to P480 per kilo, higher than his maximum suggested retail price of P270 to P300 per kilo for pork loin (kasim) and P300 to P350 per kilo for pork belly (liempo).

Given the government’s stricter rules on meat freshness, he said vendors have raised the consumer prices to reflect their acquisition costs for freezers or ice.

Aside from food, Dacanay said fuel prices briefly increased by 3 percent after Iran and Israel exchanged missile attacks in the second to third weeks of the month.

Oil firms raised the prices of diesel by P1.80 per liter and kerosene by P1.50 per liter.

Cheaper power, rice

Dacanay, however, said oil prices “slightly moderated in the tail-end of the month when tensions de-escalated.”

Global market data showed US-sourced and European crude oil both eased by 8 percent to around $68 per barrel.

“Electricity rates in Metro Manila also fell by 0.9 percent month-on-month due to lower generation charges,” Dacanay said.

The economist added that rice prices continued to gradually decline to P40.95 per kilo from P41.07 per kilogram.

“Non-food prices likely remained stable as deflationary pressures from Chinese imports of manufactured goods remain,” Dacanay added.

Core inflation, which excludes volatile items like food and fuels, was unchanged at 2.2 percent from April to May, according to the Philippine Statistics Authority.

Another BSP rate cut

Dacanay said the Bangko Sentral ng Pilipinas (BSP) will likely pause its policy rate reduction in August before easing it in October due to manageable overall inflation for the full year.

BSP lowered its inflation outlook to 1.6 percent from 2.4 percent, signaling a better level than its minimum target of 2 percent.