Read this in The Manila Times digital edition.The country's headline inflation likely slowed down in July, analysts polled by The Manila Times said.Projections for the month ranged from 3.9 to 4.4 percent with a 4-percent average, down from the 4.1 percent posted in June.The figure, however, was still higher than the 2.7 percent recorded in July last year.The Bangko Sentral ng Pilipinas (BSP) earlier projected inflation to settle within 3.9 to 4.7 percent.The Philippine Statistics Authority (PSA) will release official July inflation data on August 5.Philstocks Financial Inc. senior research analyst Japhet Tantiangco said inflation likely rose to 4.4 percent.'This is first due to the price of oil, which was seen to have increased during the month. There was also the rise in electricity rates which was seen to have added to the inflationary pressures' Tantiangco said.The Department of Energy said local oil companies have raised fuel prices three times this month.In July, the Manila Electric Co. (Meralco) hiked the cost per kilowatt-hour (kWh) for households consuming 200 kWh per month by P0.2353.Tantiangco said the depreciation of the peso also contributed to the uptick.The peso has depreciated by 4.62 percent against the US dollar year-to-date, closing at P50.35:$1 on July 21, 2021, softer from P48.02:$1 at the end of December 2020, the Bangko Sentral had reported.Impact of agricultural products'The price of agricultural commodities observed were seen to have been mixed though most have posted an increase. Those with a month-on-month increase in prices observed this July include rice, beef, pork, fruits and vegetables,' Tantiangco also said.Analysts from ING Bank Manila and Security Bank Corp. (SBC), for their part, believe that inflation will hit 4.0 percent.'I'm at 4 percent with base effects on select transport items and modest gains in food inflation partially offsetting higher energy costs and a general rise in prices due to a weaker PHP,' said ING Bank Manila senior economist Nicholas Mapa.Mapa said, however, that inflation is expected to reverse its downtrend in the coming months as a weaker peso, elevated energy costs, and a pick up in food prices all combine to threaten the BSP's inflation forecast of 4 percent, or the upper end of their target.SBC chief economist Robert Dan Roces, meanwhile, said that inflation will likely settle within 3.9 to 4.3 percent with an average of 4 percent.'The heavily-weighted food basket may have posted a slight 0.1 percent m/m (month-on-month) growth as improvements in pork supply may have been offset by higher fish and vegetable prices on the back of the weather disturbances,' said Roces.Roces said the higher Meralco rates also pushed up the utilities basket by 0.6 percent month-on-month.'The restaurants and services basket, the third heavy-weighted basket, may have posted a m/m growth of 1.0 percent as looser curbs and fewer restrictions pulled in demand for the sector,' said Roces.He said oil price movements remain the primary upside risk as fuel and utilities inflation track changes in oil prices.Roces said transportation inflation may return as a risk with the reimposition of the enhanced community quarantine (ECQ) in August, restrictions in passenger capacity may again result in higher transport costs.Lower inflation forecastAnalysts from Rizal Commercial Banking Corp. (RCBC), Union Bank of the Philippines (UnionBank), and Regina Capital Development Corp. all forecast inflation to settle at 3.9 percent.RCBC chief economist Michael Ricafort said relatively higher base effects from a year ago could quantitatively lead to some easing of year-on-year inflation for the month of July.'However, the relatively lower inflation could ease after July 2021, up to around September-October 2021, thereby could lead to some uptick in year-on-year inflation until around October 2021 above 4 percent, in time for the typhoon season in a typical year, before easing significantly to 2-percent to 3-percent levels starting November-December 2021 when inflation quantitatively would start from a much higher base/denominator by then,' said Ricafort.He said pork prices would still gradually ease in the coming months thereby could help ease food prices.Global crude oil prices that have already eased could also lead to some rollback in local fuel pump prices that could somewhat help ease local prices after a series of oil price hikes in previous weeks.'Offsetting factors include the weaker peso exchange rate versus the US dollar, among the weakest in 13 months and already depreciated by a total of about 5 percent since June 2021, thereby could lead to higher import prices. Some storm damage especially in the latter part of July 2021 could have led to some uptick in agricultural prices, as expected during the typhoon season,' said Ricafort.UnionBank chief economist Carlo Asuncion said he expects 3.9 percent inflation for July, saying 'and reading the disinflation of food items, particularly meat products, and transport costs, which were key to upward pressures the previous month.'Regina Capital Managing Director Luis Limlingan, for his part, said inflation will drift towards the government's target band.'Contributing factors would be the loosening of bottlenecks on the supply side. However, problems caused by the rains could still give pressure,' said Limlingan.'Peso depreciation also could hurt inflationary recovery,' he added.
