‘Slower July inflation shows scrimping mode’


THE July inflation data released by the Philippine Statistics Authority (PSA) on Thursday indicate that Filipinos are scrimping on non-essentials such as restaurant food, personal grooming, and vices, according to local economists on Thursday.

The latest PSA data showed inflation slowed to 4 percent in July 2021 from 4.1 percent in June 2021. This is the slowest rate posted this year and since December 2020 when inflation averaged 3.5 percent.

However, inflation remained higher than the 2.7 percent inflation posted in July 2020. Data showed inflation averaged 4.4 percent in the January to July period this year.

“It is clear that there is some demand with the rise [though slower] of prices of these products. If you notice, these commodities are considered to be discretionary in nature [vs non-discretionary/essential ones],” UnionBank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror.

“Thus, the meager demand (still), at this point, is understandable. The stop-and-go nature of the economic recovery is also playing into prices, obviously,” he added.

In a briefing on Thursday, National Statistician Claire Dennis S. Mapa listed to reporters the reason for the slowdown: transportation such as tricycle fares which slowed to 11.3 percent in July compared to 17.6 percent in June; petroleum and fuels, 17.7 percent versus 21.5 percent; and airfare, which contracted 8.6 percent in contrast to a decline of 1.3 percent in June.

Mapa also said inflation in the Restaurant and Miscellaneous Goods and Services sector slowed. This was mainly due to Meals which recorded an inflation of 4.2 percent in July compared to 4.6 percent in June.

This was followed by articles for Personal Hygiene, such as shampoo, which posted an inflation of 2.5 percent in July compared to the 2.8 percent recorded in June 2021, as well as Barbershop Services which posted a 10.3 percent inflation last month versus the 11.3 percent in June.

Sin products

Another major reason for the slowdown in the increase in commodity prices, Mapa said, were sin products such as cigarettes, beer, and brandy.

Based on the data, the increase in cigarette prices slowed to 11.9 percent in July compared to 12.8 percent in June; Beer recorded an inflation of 4.8 percent inflation versus the 6 percent it recorded in the previous month; and Brandy with an inflation of 4.9 percent inflation in July, slower than the 6 percent posted in June.

“It is due to low demand arising from work-from-home arrangements and the cautious attitude towards spending time outside of the house. The psychological burden of keeping safety protocols has made many forgo many social activities,” University of Asia and the Pacific School of Economics Dean Cid L. Terosa told this newspaper.

De La Salle University economist Maria Ella Oplas for her part said the slower demand for these products, which affected their price, owed to fears of the Delta variant.

She noted that it was in July when news broke that the Delta variant had reached Philippine shores. In mid-July, the Department of Health (DOH) reported there were 16 cases of the Delta variant in the Philippines.

The number has since grown to 116 cases as of Thursday. DOH data showed there are 95 local cases of the Delta variant and 83 of these cases are in the National Capital Region (NCR), the center of all economic activity in the country.

“The impact of Delta really scared people and limited/stopped going out. I think people [also] prioritized the necessities because of the continued depletion of people’s savings,” Oplas said. “We are all in the second year of this pandemic. I’m sure a lot are living on their savings.”


Apart from the pandemic, Ateneo Center for Economic Research and Development (ACERD) Associate Director Ser Percival K. Peña-Reyes told BusinessMirror the slowdown in consumption due to inclement weather may have also been a factor.

Peña-Reyes noted that Typhoon Fabian, which also occurred mid-July, made it more difficult for suppliers to deliver goods and for consumers to access them.

He also agreed with Terosa that work-from-home arrangements may have also tempered the demand for these kinds of commodities.

BPI Chief Economist Emilio S. Neri Jr. told BusinessMirror that the slowdown in inflation in July is due to a combination of “strong demand for essentials but also sustained weakness in demand for non-essential services.”

For example, Neri said, “the demand recovery for essentials is evident as the community quarantines were eased which has led to a weaker peso as the country’s imports have been picking up pretty fast. On the other hand, air fares continue to fall due to lack of travel demand.”

He said with this, it cannot be concluded that the slowdown in inflation was due to weak demand, and “by no means justifies a policy rate cut.”

Neri said, however, that the RRR reduction was a different matter since this is more of a medium-term Bangko Sentral ng Pilipinas (BSP) policy commitment.

Signs of improvement

Meanwhile, former ACERD Director Alvin P. Ang held a different view. He said the slower inflation in July showed signs of improvement in the economy.

Ang said the increase in prices may have slowed due to greater availability of these commodities as restrictions were eased.

He explained that in the past, the increase in inflation was mainly driven by the shortage of these commodities.

“Maybe public transport became more accessible and more people went out. These are signs of improvement (that extended) until the last week (of July),” Ang said.

Food inflation

The National Economic and Development Authority (Neda) said overall food inflation slightly increased from 4.9 percent in June to 5.1 percent in July. In particular, fish inflation accelerated from 8.7 percent to 9.3 percent due to Typhoon Fabian which affected regional port operations.

The Neda said in a statement that vegetable inflation also turned positive from -2.7 percent to 5 percent due to the flooding caused by heavy south monsoon rains.

Pork inflation, the main driver of inflation in 2021 due to the outbreak of the African swine fever, fell from 49 percent in June to 38.4 percent in July. This contributed to the slower meat inflation of 16 percent in July. Average rice prices also continue to decrease with rice inflation at -1 percent.

“We are now seeing the benefits of Executive Orders 133 and 134. We expect pork prices to go down further in the second half of the year as more imports come in through the increased minimum access volume allocation and lower tariffs. Rest assured that we will continue to proactively manage any threats to the country’s food security, especially during the ECQ,” Socioeconomic Planning Secretary Karl Kendrick T. Chua said.

To manage fish inflation and ensure stable fish supply, the Department of Agriculture will fast-track the issuance of the certificate of necessity to import (CNI) fish to cover the domestic demand gap during the closed fishing season starting October 2021.

Meanwhile, non-food inflation slowed down from 3.4 percent in June to 3.2 percent in July. One of the main drivers was the decrease in transport inflation from 9.6 percent to 7.0 percent as mobility in the country continued to improve.

However, with the emergence of the more contagious Covid-19 Delta variant, the government has prioritized saving lives and managing the risks from Covid-19 through heightened restrictions in high-risk areas from August 6 to 20, 2021.

“While the ECQ is expected to slow down economic activities in August, this is an investment towards a strong recovery in 2021. We encourage everyone to use this time to get vaccinated, so we can safely reopen the economy once we have contained the spread of the Delta variant,” Chua said.


Meanwhile, inflation in NCR in July 2021 stood at its previous month’s annual rate of 3.2 percent. In July 2020, inflation in the region was posted at 2.2 percent.

Image courtesy of Nonie Reyes

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