Inflation in May dips to 2.1% due to cheaper transport, slower food price rise

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Metro Manila (CNN Philippines, June 5) – Prices of basic goods logged a softer pickup in May, pulled down by cheaper transport costs and rice.

The Philippine Statistics Authority said Friday that inflation clocked in at 2.1 percent for the month, easing from 2.2 percent in April as well as last year's 3.2 percent. This is the slowest price increase since November, and sustains four straight months of a slowdown.

This also settles at the low end of the 2.3 percent forecast of the Bangko Sentral ng Pilipinas, coming from a range of 1.9-2.7 percent

National Statistician Claire Dennis Mapa said the 5.6 percent annual decline in transportation expenses brought down inflation, coupled with slower price movements for food and non-alcoholic drinks, clothing and footwear, household furnishing and maintenance, as well as the cost of recreation and culture.

​Public utility vehicles have been forced to stop operations since mid-March as the state sought to restrict movement to avert a further spike in coronavirus infections.

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Inflation was softer in Metro Manila at 1.4 percent, which came as the region remained under strict stay-at-home rules to contain the COVID-19 outbreak. Meanwhile, prices rose by an average of 2.2 percent in the provinces.

Prices of food and drinks as well as restaurant expenses, deemed essential items during the lockdown, contributed the most to inflation. Restaurants had to shift services to take-out and delivery items only, as the usual dine-in options have been banned to limit close contact.

Rice, corn, sugar, chocolate and similar sweeteners saw prices drop compared to a year ago, PSA data showed. Food prices alone rose by 2.9 percent, coming from a 3.4 percent climb the previous month.

Meanwhile, an 18 percent climb was recorded for beers and liquor versus May 2019.

The latest reading brought the five-month tally to 2.5 percent. The government expects full-year inflation between 1.75-3.75 percent.

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Bangko Sentral ng Pilipinas Governor Benjamin Diokno told reporters that he expects inflation to stay benign in the coming months as the pandemic led to a global economic slowdown. But he flagged that possible swings in oil prices could be a risk to commodity prices.

The central bank has slashed the key interest rate to 2.75 percent and also reduced reserve requirements for banks – moves seen to inject more cash and keep borrowing rates low as families and businesses try to recover from the current slump.

Economists at ANZ Research said the inflation downtrend will allow prices to be a "non-issue" for monetary policy makers this 2020, noting that the focus should now be on how the BSP can "directly support growth and assist smooth funding of the fiscal stimulus measures." The global analysts pointed out that the concern should now be on the "worryingly high" unemployment rate, which surged to 7.3 million Filipinos in April in April as the pandemic struck.