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  • Writer's pictureZiggurat Realestatecorp

Inflation cools to 4.1% in November

Headline inflation cooled to its slowest pace in 20 months in November amid easing prices of food as well as restaurant and accommodation services, the Philippine Statistics Authority (PSA) said.

Preliminary data from the PSA showed headline inflation climbed 4.1% in November, slower than 4.9% in October and 8% in November 2022.

This was the slowest inflation rate in 20 months or since the 4% seen in March 2022.

It was also lower than the median estimate of 4.4% in a BusinessWorld poll of 15 analysts conducted last week, and at the lower end of the 4-4.8% forecast range of the Bangko Sentral ng Pilipinas (BSP).

However, November inflation was still above the 2-4% target for the 20th straight month.

Month on month, the consumer price index was nil in November from -0.3% in the previous month.

For the January-to-November period, inflation averaged 6.2%, faster than 5.6% in the same period a year ago. This is still above the BSP’s full-year baseline forecast of 6%.

“(Inflation) is going down and without shocks that will happen in the next three weeks, we will see inflation going down,” National Statistician Claire Dennis S. Mapa said.

Core inflation, which discounts volatile prices of food and fuel, also eased to 4.7% in November from 5.3% in October and 6.5% in November 2022.

In the eleven months to November, core inflation averaged 6.8%.

“However, there are risks such as rice and oil prices. The situation in November was good because prices of gasoline and diesel have been going down. But we will see what the prices are this December,” Mr. Mapa said.

He said the sharp slowdown in November inflation was mainly due to easing food prices, as the heavily weighted food and non-alcoholic beverages index fell to 5.7% in November from 7% in the previous month.

Food inflation decelerated to 5.8% in November from 7.1% in October and 10.3% a year prior. This was the slowest rise in food inflation since 5.2% in May 2022.

Mr. Mapa said the deceleration in food inflation was mainly due to the 2% decline in the vegetables, tubers, plantains, cooking bananas and pulses index, a reversal from the 11.9% growth a month ago.

The slower annual increases in fish and other seafood (4.9% in November from 5.6% in October) and sugar, confectionery and desserts (1.5% from 4.9%) also contributed to the downward trend in food inflation.

On the other hand, higher year-on-year growth rates were observed in the indices of rice (15.8% from 13.2%), and milk, other dairy products and eggs (7.6% from 7.5%).

The average price of regular milled rice last month went up to P46.73 per kilo from P45.42 per kilo in October. The average price of well-milled rice also rose to P51.99 per kilo in November from an average of P51 per kilo a month earlier.

The slowdown in November inflation is also attributed to the 0.8% decrease in the transport index from the 1% growth a month ago. The restaurants and accommodation services index also slowed to 5.6% in November from 6.3% in the previous month.

In November alone, oil companies cut pump prices by P1.90 a liter for gasoline, P4.45 a liter for diesel, and P3.3 a liter for kerosene, data from the Energy department showed.

Meanwhile, inflation in the National Capital Region slowed to 4.2% in November from 4.9% in October, while inflation in areas outside Metro Manila eased to 4.1% from 4.9% in the prior month.

The November inflation rate for the bottom 30% of income households slowed to 4.9% from 5.3% in October and 9.2% last year. The 10-month average stood at 6.9%.

The National Economic and Development Authority (NEDA) in a statement said the slower November inflation can be attributed to the timely implementation of measures to stabilize food supply amid domestic and external headwinds.

“With the right interventions in place, including the proper and timely deployment of trade policy, we are confident that we can effectively manage inflation and prevent unnecessary upticks in prices of goods and commodities to safeguard the purchasing power of Filipino families, especially those from the most vulnerable sectors,” NEDA Secretary Arsenio M. Balisacan said.


Meanwhile, the Bangko Sentral ng Pilipinas (BSP) said it needs to “keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident.”

“The latest inflation outturn is consistent with the BSP’s projections that inflation will likely moderate over the near term due to easing supply-side price pressures and negative base effects,” it said in a statement.

The BSP said the balance of risks to the inflation outlook “still leans significantly towards the upside.”

“Key upside risks are associated with the potential impact of higher transport charges, electricity rates, and international oil prices, as well as higher-than-expected minimum wage adjustments in areas outside the National Capital Region,” it said.

A weaker-than-expected global recovery and government measures to mitigate the impact of El Niño could further reduce inflation.

The BSP sees inflation averaging at 6% in 2023 and 3.7% in 2024, before falling further to 3.2% in 2025.

“The BSP will continue to monitor inflation expectations and second-round effects and take appropriate action as needed to bring inflation back to the target, in keeping with the BSP’s price stability mandate,” it said.

Last month, the BSP kept its target reverse repurchase rate at a 16-year high of 6.5%. The BSP raised borrowing costs by a total of 450 basis points (bps) from May 2022 to October 2023 to tame inflation.

Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said it is possible for inflation to fall below 4% in December and may even reach 3% in the first quarter of 2024 in the absence of supply shocks.

However, Mr. Neri said inflation could rebound to 4% or higher in the second quarter, especially if the effect of El Niño is worse than expected, Mr. Neri said.

“Rice prices are likely to remain the primary factor contributing to inflation in the near future. Local supply continues to be at a level where rice inflation is usually double digit… The price of rice may stay high as long as supply stays at this level,” he said.

Globally, rice supply remains a concern due to a decline in production in major exporting countries like India. The Philippines imports around 15% of its rice requirement every year.

Mr. Neri said BPI sees inflation averaging at 6% this year, before easing to 3.7% in 2024.

“It might be premature to expect rate cuts in the near future despite the improving outlook for inflation. The BSP might need to keep interest rates elevated for most of next year especially given the possibility of an inflation rebound in the second quarter of 2024,” he said.

HSBC economist for ASEAN Aris Dacanay said the consistent inflation downtrend should give the BSP room to pause at the Dec. 14 Monetary Board meeting, but rate cuts are still not on the table as there are many upside risks to inflation. 

“That said, we continue to expect the BSP to stay pat for longer based on inflation — more so with the need to mind the gap between the Fed and the BSP policy rates to help support the peso,” he said.

The US central bank kept borrowing costs unchanged at 5.25-5.5% for the second straight month in November. This was after it hiked policy rates by 525 bps from March 2022 to July 2023.

Following the release of the November inflation data, the peso closed at P55.32 per dollar on Tuesday, strengthening by two centavos from its P55.34 finish on Monday.

This was the peso’s strongest close since its P55.19 per dollar finish on Aug. 2.

“We only expect the BSP to begin its easing cycle right after the Fed does its first rate cut. Our baseline view is for the Fed to do its first policy rate cut in the third quarter of 2024,” Mr. Dacanay added.

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