Inflation gains pace in June as economy reopens

MANILA, Philippines — Inflation accelerated for the first time this year in June as the economy began to come out of strict lockdowns, the Philippine Statistics Authority (PSA) reported on Tuesday.

Consumer prices rose 2.5% year-on-year in June, up from 2.1% in the previous month, but still falling within the central bank’s 1.9-2.7% projection for June.

Last month’s inflation print marked the first time this year that prices of basic goods and services gained some pace since January, albeit a welcome sign the economy is regaining strength from exhaustive quarantine protocols imposed to stop the spread of coronavirus disease-2019 (COVID-19) for three months since March.

At a briefing on Monday, Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) said inflation would remain benign this year and over the next two years, falling within the 2-4% BSP target. From January to June, inflation averaged 2.5%.

But prices becoming less of an issue is not entirely good news. Diokno admitted consumers continued “holding back on their consumption,” which in turn discourages more production from businesses. With demand tepid, prices are likely to remain stable even as the economy shrinks.

In fact, economic managers are resigned the Philippine economy contracted deeper in the second quarter ending June, entering a technical recession. A gradual bounceback is projected over the last two quarters.

By region, inflation in Metro Manila in June picked up the pace to 2% from May’s 1.4%. Outside the National Capital Region, prices rose faster at 2.7%, up from 2.2% in May, PSA figures showed.

On the PSA’s report on Tuesday, price gains were mainly attributed to faster inflation in the transport index, which gauges transport fares, among others. As public transport restarted in some areas of the archipelago last month, transport prices rose 2.3% year-on-year, recovering from a slump over the past three months.

The heavily-weighted food and non-alcoholic beverage index, meanwhile, posted slower inflation of 2.8% in June, down from May’s 3.1% and April 3.3% when bottlenecks on bringing farm produce to the city disrupted supply chains.

Prices under the restaurant and miscellaneous goods and services also decelerated to 2.5% annually from 2.6% during the lockdown period in April and May. Leisure activities and dining out were prohibited during the enhanced community quarantine in Luzon from March 17 to May 31.

On the flip side, alcohol beverages and tobacco prices rose 19.4% annually in June, up from 18.8% in May as towns and cities began to lift liquor bans implemented together with the lockdowns.