Oil and rice price shocks sending the September inflation rate sharply higher to 6.1 percent are seen dissipating in October when more data is captured reflecting the macroeconomic lay of the land, officials said on Thursday.
House ways and means committee chairman Joey Salceda of the 2nd district of Albay, for instance, said data capture and timing had more to do with the acceleration of commodities and goods prices during the month than any other factor and that inflation at the October survey should moderate as prices normalize.
“The September inflation figure is due almost entirely to rice price spikes and the global oil price spike. The PSA collects data on the first five days of the month, and on the 15-17th days, so it captured a lot of the speculative rise in global oil prices, but not the sharp declines that followed September 27,” Salceda said.
According to Salceda, the sharp decline in global oil prices in the waning days of September and compliance with the rice price ceiling imposed by President Ferdinand Marcos Jr. on Wednesday when Executive Order 39 was rescinded, should begin to tell on inflation at next month’s prices survey. “So, this is a snapshot in time past, and we have to analyze it in that light. The weeks after data collected were entirely better, and we’ll catch that next month,” Salceda said.“In other words, this is probably the worst inflation rate we will record for the -ber months, and it gets better from here.”
Salceda, the highest paid and most quoted analyst of his era before later joining the legislature, said he told fund managers inflation would lift to 6.2 percent based on simulation has used since the 1990s.
“This inflation is imported. Rice prices went up 17.9 percent year-on-year in September, but world prices of rice also sharply declined on September 27, and are now at their August lows,” he reiterated.
“So, the September figures also do not capture the sudden decline in world prices. Correctly, President Marcos has also already lifted the rice price cap under Executive Order 39, as both global and local conditions have since become more manageable.”
“In short, things have gotten better, and the data didn’t capture it yet because the methodology covers the first half of the month. Expect it captured in the October figures.”
Salceda also noted a sharp decline in the sugar inflation rate as the milling season started in September.
“Sugar inflation is back in the single digits, most likely due to the start of the milling season. I expect better prices in the October and November inflation figures, as the milling also peaks during that period.”
But while he holds a sanguine view on inflation, he acknowledged the need to mitigate the risks going forward.
“I think the risk of further oil spikes has come to pass. Weak demand has undercut the efforts of OPEC countries to boost prices with supply cuts. So, expect oil to be in the neighborhood of just 70-80 USD per barrel over the coming weeks.
“But food prices still need to be watched out for, especially because the ber months typically tend to be bonus season, which is naturally inflationary.With sufficient food, we can manage the inflationary impacts of sudden injections of income among employees.”
“As for rice, there is no alternative to producing more and more rice per hectare. We are still at very improvable levels. The DA under President Marcos has already produced a bumper crop early this year. We need to keep doing even better,” Salceda said.
House committee chairman on agriculture and food, Mark Enverga, also expressed optimism that inflation already peaked in September and expect the price of major agricultural products to soon decline.
The legislator from the 1st district of Quezon based this outlook to the upcoming harvest season and the transformative agricultural initiatives implemented by President Marcos Jr., who also serves as Agriculture Secretary.
“We believe that inflation has peaked, and we expect it to be on a downward trend because of the forthcoming harvest season. As the earth yields its bounty, we anticipate a steady decline in inflation rates,” Enverga stated.
He emphasized the role the harvest season historically plays in stabilizing prices.
“As the harvest season approaches, we can anticipate stabilization and, eventually, a decrease in the inflation rate.”
He also highlighted the decline in the price of essential agricultural products, including sugar, as a result of strategic reforms in thel sector.
“Addressing the inflationary pressures on items like sugar is crucial to easing the burden on Filipino households. The measures taken to stabilize prices have proven effective, providing much-needed relief to our constituents,” he said.
Senior Deputy Speaker and Pampanga 3rd District Rep. Aurelio “Dong” Gonzales Jr. said Filipinos could expect inflation to go down in the days ahead.
“Consumer prices rose primarily due to increases in the price of rice and oil products. The spike in fuel cost caused a domino effect on transportation and electricity, impacting all products,” he said.
“But the bold decision of President BBM to impose a price limit on rice brought down the selling price of the staple last month, which meant that inflation should correspondingly go down,” he said.
He said the government may control rice prices but has little influence on the retail rate of oil products which are dictated by the cost of imported crude oil in the world market.
Nevertheless, the administration is helping the poor and the transport sectors by extending financial assistance through agencies like the Department of Social Welfare and Development and the Department of Transportation, he said.
ok At the Department of Finance, Secretary Benjamin E. Diokno bared of redoubled efforts at mitigating the effects of high inflation, saying the mechanisms are in place to arrest the rising commodities prices.
“To help ensure that rice and vegetable inflation will decline for the rest of the year, the government will continue to implement a package of measures that seek to address non-competitive market behavior, support farmers and protect the vulnerable,” Diokno said in a statement.
The measures include accelerated efforts at warehouse investigation and forfeitures, hale into court anti-competitive market agents, and strict price monitoring.
Diokno also vowed to boost the use and implementation of the Rice Competitiveness Enhancement Fund (RCEF) programs such as farm mechanization, seed development, credit assistance and other activities that improve farmer productivity and cut costs while linking these players to the value chain.
He also vowed to speed up the implementation of the 2023 fuel assistance for farmers and fisherfolk.
“The Inter-agency Committee on Inflation and Market Outlook (IAC-IMO) remains committed to the continued monitoring of developments in food and non-food inflation to be able to formulate timely and relevant policy recommendations to help mitigate inflationary pressures,” Diokno said.
