LOWER INFLATION IN JULY | Marvin Germo

LOWER INFLATION IN JULY

By: Marvin Germo | August 7, 2019

Our Economy Keeps On Progressing

The inflation just broke the record in 31 months! The rate this July is now the slowest which is proof that our economy keeps on progressing. Per the report of the Philippine Statistics Authority (PSA), the inflation eased down to 2.4% from 2.7% recorded last June and 5.7% posted in July 2018. There are expectations that the central bank will continue to loosen monetary policies and if that happens, the result will be better in the coming months. In fact, the rate today matched the 2.7% last July 2017 and within a 31-month time frame, it was moving at low speed. It is good news not only for the government but as well as for consumers and investors in the country. Let me share with you the details of the July inflation.

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Within The Authorities’ Target

The inflation this month is within the target of BSP Department of Economic Research as is it between the 2-2.8% forecast for the month. If we take a look at it year-to-date, the inflation is at 3.3% average which is beyond the 2-4% target band of BSP this year and above the full-year forecast average of the downward revised 2.7%. In terms of core inflation, the rate is 3.2% this month, still lower than the 3.3% recorded last June and 4.5% in July last year. Core inflation does not include volatile food and energy products in the consumer price index (CPI).

Slower Inflation Is Expected

It seems like the government was not surprised by the July inflation rate at all. According to them, it was expected and it can be attributed to the sluggish increase of the non-alcoholic beverages and heavily-weighted food prices. From 2.7% last June, it eased down to 1.9% this month. Almost all subsectors experienced slower price gains compared to June. The same applies to education since the base effect of the free tertiary education last year disappeared already. This just means that there is a slow price increase in general. For investors, it is a good time to continue investing in companies in the food and power industry.

Deceleration Contributors

So to breakdown the contributors to the deceleration this month, here I share the details. The fall in the average retail price of rice with the rice tariffication kicking during the month of July is one of the keys to the easing inflation rate. A stronger peso is also a contributor because it helps lower the cost of the raw materials we are importing abroad. Plus based on the food index accounting for 35% of the consumer basket of the average households, the prices of food slowed down to 1.7% from 2.6% in June and 6.8% in July last year and of which rice was the biggest giver.

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