Food, fuel costs hike August inflation to nine-year high

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FILE PHOTO. The rise in prices of widely-used goods will likely be at its fastest pace in August or September, a central bank official said.

Metro Manila (CNN Philippines, September 5) — Prices of goods and services continue to swell as the country's August inflation hits a nine-year high of 6.4 percent, the Philippine Statistics Authority said Wednesday.

The August inflation figure exceeds forecasts of the Bangko Sentral ng Pilipinas (BSP) pegged at 5.9 percent and the Finance Department at 5.8 percent.

READ: BSP, analysts expect inflation to hit 9-year high in August

The rate was also higher than the 6 percent median forecast of analysts polled by CNN Philippines. In July, the inflation rate was at 5.7 percent.

The PSA linked the uptick to the 8.5 percent rise in the prices of food and non-alcoholic beverages. In July, the uptrend was at 7.1 percent.

Inflation in Metro Manila is even higher at 7 percent from 6.5 percent in July, while outside Metro Manila the rate is now at 6.2 percent from the 5.5 percent in the previous month.

Alcoholic beverages and tobacco prices rose to 21.6 percent — the highest among the basket of goods — from 21.5 percent the previous month.

Commodity indices such as those for house maintenance, health services, and culture also went up.

BSP Governor Nestor Espenilla said food supply shocks, particularly rice, pushed inflation beyond the acceptable range.

"These warrant more decisive non-monetary measures to fully address," Espenilla said in a statement.

The country's food supply has been in a precarious state amid price increases and problems with imports. The NFA reported last month that rice weevil or bukbok infestation has stalled the delivery of over 300 thousand sacks of imported rice.

Government's import of 17,000 metric tons of "galunggong" or round scad also struggled with prices due to a formaline scare.

Espenilla added that elevated global oil prices and the weakness of the peso against a strong U.S. dollar added pressure to inflation.

"However, it is equally apparent that strong domestic demand is making it too convenient for producers and traders to pass on higher costs and possibly more to consumers," he said.

The BSP will give recommendations to the Monetary Board during its next policy meeting on September 27.

"It is most critical at this point to restore inflation back to the target range soonest and securely anchor inflationary expectations," Espenilla said.

Administration downplays inflation

Budget Secretary Benjamin Diokno said that some manufacturers have been "opportunistic" for increasing prices of goods due to the tax reform law.

"We are using the power of the state to ask for cooperation from manufacturers. If there's no reason for them to increase prices, then they shouldn't," he said in a press briefing.

He expects rice prices to decrease by ₱4 to ₱7 per kilo in the fourth quarter, as they expect Congress to file a rice tariffication within eight weeks.

The Budget Chief then said he will reconvene the Development Budget Coordination Committee to reassess their projected inflation this year of 4 to 4.5 percent.

He maintained, however, that this month's inflation is still manageable.

"Yes, manageable. I've seen worse inflations. I've been in government for 50 years," Diokno said.      

House Speaker Gloria Macapagal-Arroyo likewise downplayed the inflation report, adding that inflation was higher during her term as President.

I remember in my time, in March of 2009, the inflation was 6.6 percent, but by June, it was down [by] 1.5 percent. Conceivably, even a sharp increase can be resolved but we have to analyze what's driving it and therefore how to address what's driving it," Arroyo told reporters.

Socioeconomic Planning Secretary Ernesto Pernia called the inflation "not alarming."

"Quite normal in a fast growing economy resulting in strong demand and rising expectations of people. Remember that in earlier administrations before [Benigno Aquino III] inflation rates were around double digits," Pernia said.

Presidential Spokesperson Harry Roque said the administration is doing what it can.

"The administration is taking steps to address the challenges, particularly rising prices, faced by Filipino families," Roque said.

CNN Philippines' Rex Remitio and Ina Andolong contributed to this report.