THIS early, plan for a modest noche buena. What’s important is still being alive with loved ones. That’s more or less the unwritten advice from experts as the nation cautiously approaches the second Christmas in a pandemic, still haunted by Covid but eager to see once more the malls, parks and usual gathering places for families, especially for children long cooped up at home.
Besides the health protocols that remain in place—even for populations with high vaccination rates—shopping is expected to be muted this year, what with unemployment still high and wages low; this, as a continuing climb in world oil prices has a spillover effect on food and transportation.
On Friday, the Philippine Statistics Authority (PSA) reported that inflation had slowed to 4.6 percent in October from the 4.8 percent posted in September. Inflation averaged 4.5 percent in the January to October period.
That decline, however, “seems insignificant” given that the slowdown was only two percentage points, in the view of Ateneo Eagle Watch Senior Fellow Leonardo A. Lanzona Jr.
Lanzona told the BusinessMirror this reflects supply constraints that may have been caused by high oil prices. Based on reports, oil prices have steadily climbed to around $85 per barrel in the past few months.
While he does not expect oil prices to breach $100 per barrel, Lanzona thinks it is likely that oil prices will be the main culprit should inflation continue to rise in the coming months.
Lanzona believes that Christmas spending will remain muted this year since Filipinos still have limited purchasing power given the high unemployment rates.
Based on PSA data released on Thursday, some 4.25 million Filipinos remain unemployed in September. (See: https://businessmirror.com.ph/2021/11/04/4-25-million-jobless-in-sept-unemployment-now-at-new-high-of-8-9/ and https://businessmirror.com.ph/2021/11/04/rising-overemployed-numbers-stir-concern/)
“I am not sure if oil prices will breach $100 per barrel, but the global trend especially with climate-change concerns is to limit oil production worldwide. Hence, oil prices will likely increase and so will inflation,” Lanzona said.
“Our best bet is to look for alternative and climate-friendly sources of energy. The sooner we do this, the greater will be our chances of reducing inflation,” he added.
In a message to this newspaper, BPI Chief Economist Emilio S. Neri Jr. said their “external advisers” do not expect oil prices to reach $100 per barrel given that the supply remains adequate to meet demand.
For the remainder of the year, Neri sees inflation remaining near 4 percent. This will be driven by the lower alert level in Metro Manila and the Christmas holiday spending.
“Month-on-month inflation can rise rapidly in November and December. However, because of base effects, the year-on-year print will likely slow down through early 2022 before it starts rising again,” Neri said.
PSA: Oil prices’ spillover effects
The continued increase in international oil prices could have spillover effects causing food to become expensive in the coming months, according to the PSA.
In a briefing on Friday, National Statistician Claire Dennis S. Mapa said the higher oil prices have already affected transportation costs in the country.
“There are expectations that there will be spillover effects [in the other commodity] groups in the basket, particularly as you mentioned, the food basket. So we will be tracking this in the next months particularly in the last two months kasi holiday season if we already have that spillover,” Mapa said.
The National Economic and Development Authority (Neda) said the government has put in place measures to prevent an increase in food prices.
“One of the government’s highest priorities amid the mobility restrictions is to ensure stable access to affordable food. The temporary importation of pork has worked in the National Capital Region. We need to leverage this momentum to allow unhampered supply to the wet markets and to all the regions,” Socioeconomic Planning Secretary Karl Kendrick T. Chua said.
Meanwhile, the Neda said nonfood inflation increased to 3.8 percent from 3.3 percent due to higher world market prices for oil.
Neda said transport inflation accelerated from 5.2 percent to 7.1 percent, primarily due to the uptick in private transport inflation from 16.7 percent to 25.5 percent.
However, Neda noted that public transport inflation remained low at 1.2 percent as fares were regulated.
“Many countries, particularly net oil importers such as the Philippines, are feeling the impact of the rising world oil prices. We will continue monitoring the global developments so we can urgently respond to the impact of elevated oil prices on ordinary Filipinos, especially our PUV drivers,” Chua said.
To help public utility vehicle (PUV) drivers cope with rising fuel prices, Chua said the government has provided cash grants amounting to P1 billion for some 178,000 eligible drivers for the remainder of the year.
The Inter-Agency Task Force has also approved the increase of passenger capacity for PUVs in Metro Manila and adjacent provinces to 70 percent from 50 percent starting November 4.
Neda said this is amid the declining number of Covid-19 cases. The government is confident that this increase in transport capacity will enable drivers to earn more income while making it easier for people to travel.
Inflation in the regions
PSA said inflation in the NCR slowed to 3.2 percent in October 2021, from 3.5 percent in September 2021. In October 2020, inflation in the region was noted at 2.5 percent.
The slower pace in inflation in NCR was mainly due to the lower annual rate of increase in food and non-alcoholic beverages index at 3.4 percent during the month, from 5.2 percent in the previous month.
Annual increments also eased in the indices of clothing and footwear at 0.6 percent; and restaurant and miscellaneous goods and services, at 2.8 percent.
On the other hand, annual upticks were higher in the indices of housing, water, electricity, gas and other fuels at 3.1 percent; health, 3.3 percent; and transport at 6.3 percent.
“The indices of the rest of the commodity groups either retained their previous month’s rates or had zero percent annual growth during the month,” PSA said.
In Areas Outside of NCR (AONCR), PSA said, inflation slowed to 5 percent in October 2021, from 5.2 percent in September 2021. Inflation in AONCR in October 2020 was posted at 2.5 percent.
“Eight regions in AONCR exhibited lower inflation during the month. Among the regions in AONCR, the lowest inflation was still recorded in Bangsamoro Autonomous Region in Muslim Mindanao at 2.4 percent, while the highest remained in Region V [Bicol Region] at 6.6 percent,” PSA said.
Inflation in AONCR was primarily pushed down by the lower inflation in food and non-alcoholic beverages index at 5.7 percent in October 2021.
Data showed slower inflation was recorded in alcoholic beverages and tobacco; health; education, 0.8 percent; and restaurant and miscellaneous goods and services.
Higher annual upticks were noted in the indices of housing, water, electricity, gas and other fuels; furnishing, household equipment and routine maintenance of the house; transport; and recreation and culture.
PSA said commodity groups such as clothing and footwear, and communication recorded the same inflation rate in September 2021.
Image courtesy of AP/Aaron Favila