MAY INFLATION HITS 9-YEAR LOW AT 9.6%
MANILA, JUNE 6, 2008 (STAR) By Des Ferriols - The increase in the prices of basic commodities came a lot faster in May, with the national average inflation rate going up to 9.6 percent, the highest in nine years.
The National Statistics Office (NSO) reported yesterday that the year-on-year headline inflation rate jumped from 8.3 percent in April to 9.6 last month, the highest inflation rate since January 1999 (10.5%).
According to the NSO, the surge was primarily triggered by soaring food prices.
Last year, the NSO said the national average inflation was at 2.4 percent and the May inflation brought the average rate to 6.9 percent, breaching the government’s 3 to 4 percent average inflation for the whole year.
The May inflation hit the top end of the projected inflation rate of the Bangko Sentral ng Pilipinas (BSP), which expects prices to accelerate by 8.8 percent to 9.6 percent because of rising oil prices.
Excluding selected food and energy items, the NSO said the country’s average core inflation advanced to 6.2 percent in May from 5.9 percent in April.
Upon learning the news, Malacanang reiterated that the government has taken major steps to help the people and businesses in coping with inflation.
Secretary to the Cabinet Ricardo Saludo cited the various programs launched by the government to help the poor using the huge revenues generated by the increase in the value added tax rate, including food, diesel and electricity subsidies.
“The government is responding strongly to inflation’s challenge,” Saludo said. “The 9.6 percent inflation rate last May underscores the need for government, business and other key sectors to join hands in boosting production, conserving resources and sustaining growth in job creation to protect our living standards and competitiveness against the global escalation of prices.”
At the national level, the NSO said higher annual inflation rates continued to prevail in all the commodity groups. Inflation for food, beverage and tobacco advanced to 13.7 percent in May from 11.4 percent in April.
On the other hand, the inflation rate in clothing rose to 4 percent from 3.9 percent; housing and repairs to 4 percent from 3.8 percent; utilities 8.2 percent from 8 percent; services, 7.8 percent from 6.9 percent; and miscellaneous items, 2.7 percent from 2.6 percent.
“The Philippines’ annual inflation rate for food alone was up to 14.3 percent in May from 12.0 percent in April,” the NSO said in its report.
Central bank governor Amando M. Tetangco earlier said the weakness of the peso against the US dollar also added pressure on consumer prices that were already soaring because of supply-side factors.
With the recent development, the central bank raised its headline interest rates by a quarter of a percentage point yesterday.
It said also that it was willing to take further action when necessary to control inflation.
The rise takes the overnight borrowing rate to 5.25 percent and the overnight lending rate to 7.25 percent.
The central bank said rates on its Special Deposit Accounts (SDAs) would increase by 25 basis points to match the increase in headline rates.
Expectations of monetary tightening were tempered only by the slowdown in the country’s first quarter production that analysts said would compel monetary officials to prioritize growth over inflation concerns.
But according to Tetangco, the expected surge in the May inflation rate could be traced to the movements in the world prices of oil and oil products, which soared over the $130-per barrel level, wreaking havoc in countries dependent on oil imports.
Tetangco said domestic prices of basic commodities were also reacting to the climb in domestic pump prices as well as the provisional increases in transport fares.
“These same supply shocks are also expected to affect food prices particularly those of rice, meat, fruits and vegetables and other miscellaneous food items,” Tetangco said. “These continue to be the most important factors behind the expected higher inflation this month.”
This time last year, prices were also increasing faster but the peso was picking up strength against the dollar and the brunt of the impact of rising oil prices was generally muted. - With Marvin Sy, AP
Chief News Editor: Sol Jose Vanzi
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