Soaring food, fuel costs push inflation to 9.6 percent

June 5, 2008

The inflation rate in May rocketed to 9.6 percent, its highest level since 1999 as a result of soaring food and fuel prices, government data released yesterday showed.

The National Statistics Office (NSO) said in a statement that the rise was “primarily triggered by the continuing higher annual price increases in the heavily weighted food, beverages and tobacco index.”

According to the NSO, the inflation rate for food, beverage and tobacco advanced to 13.7 percent in May from 11.4 percent in April; clothing grew four percent from 3.9 percent.

The annual inflation rate for food alone was up to 14.3 percent in May from 12.0 percent in April, according to NSO.

The NSO said prices in other commodity groups rose more quickly too as the overall annual inflation figure in May hit the highest level since hitting 10.5 percent in January 1999.

April’s annual inflation was 8.3 percent and took the average figure for this year to 6.9 percent, well above the government’s full-year target of a three to five percent inflation rate.

Excluding selected food and energy items, core inflation rose to 6.2 percent in May compared to 5.9 percent in April, the office said.

Allan Araullo, head of research for Regina Capital Development Corp., said the increase in inflation was expected due to rising food costs, but that the May figure was “on the high side” of forecasts by economists.

Predicting 9.6 percent would be the peak, he said inflation “should taper off in the coming months as most of the commodities’ prices are coming down already.”

An economist for a major local bank, however said rising inflation was already having an effect, pushing up the peso while deterring fund flows into the stock market.

He predicted inflation “will still go higher but the degree of increase will not be as much as in previous months.”

The country, one of the world’s largest rice importers, has been hit hard by a worldwide rise in the price of rice.

Deputy BSP Gov. Diwa Guinigundo said the decision was a response to early indications of second-round effects and to higher inflation expectations.

“If they see the BSP is really serious about not allowing inflation to range beyond a certain point, then people will stop pricing and costing goods and services increasingly higher,” he said.

All the food groups posted higher annual price uptick except for eggs whose rate was slower at 7.7 percent from 8.4 percent.

Annual price adjustments were higher in rice at 31.7 percent in May from 24.6 percent in April; corn, 27.1 percent from 19.3 percent; cereal preparations, 15.3 percent from 13.9 percent; dairy products, 13.7 percent from 13.2 percent; fish, 9.6 percent from 8.8 percent; fruits and vegetables, 10.1 percent from 7.8 percent; meat, 10.4 percent from 9.8 percent; and miscellaneous foods, 7.6 percent from 6.3 percent, NSO data showed.

In the nation’s capital, inflation rate for food, beverage and tobacco rose to 12.7 percent in May from 11.1 percent in April; services, 9.9 percent from 8.5 percent; and miscellaneous items, 1.7 percent from 1.6 percent.

Inflation rate for food alone in the National Capital Region (NCR) grew by 13.2 percent in May from 11.5 percent in April.

For Metro Manila, higher annual price increase was noticed for rice at 43.6 percent in May from 38.4 percent in April; cereal preparations, 15.7 percent from 14.3 percent; dairy products, 11.8 percent from 11.3 percent; fish, 12.7 percent from 12.0 percent; fruits and vegetables, 10.5 percent from 3.5 percent; and miscellaneous foods, 6.9 percent from 5.4 percent. Slower annual price changes were however registered in eggs and meat at 3.3 percent and 10.5 percent, respectively from their corresponding last month’s rates of 5.8 percent and 11.5 percent. For five consecutive months, inflation for corn remained at 17.5 percent.

Outside Metro Manila, annual inflation in all the commodity groups continued to move at higher rates except for miscellaneous items whose annual growth rate slid to three percent from 2.9 percent. Inflation for FBT picked up to 14.1 percent in May from 11.5 percent; clothing, 3.6 percent from 3.4 percent.

Annual price changes in rice posted in all the regions moved further higher during the month. Inflation rate for rice outside the capital accelerated to 30.1 percent in May from 22.7 percent in April. The biggest gain of 23.6 percentage points (33 percent from 9.4 percent) was seen in Zamboanga Peninsula followed by the Autonomous Region of Muslim Mindanao (ARMM) at 18.7 percentage points (32.6 percent from 13.9 percent).

The annual growth rates were also higher in corn at 27.4 percent in May from 19.3 percent in April; cereal preparations, 15.1 percent from 13.8 percent; dairy products, 14.5 percent from 14.1 percent; fish, 9.0 percent from 8.1 percent; fruits and vegetables, 10.0 percent from 9.0 percent; meat, 10.4 percent from 9.1 percent; and miscellaneous foods, 7.9 percent from 6.7 percent. Meanwhile, annual inflation for eggs was slower at 9.0 percent from 9.3 percent.

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