Inflation Higher

Inflation 7.2% in August

Inquirer News Service with XFN-Asia

PRICES of basic commodities, as measured by the consumer price index, rose 7.2 percent year-on-year in August, faster than the 7.1-percent rise in July, due to dearer housing-related costs and services, the National Statistics Office said.

August prices were up 0.5 percent from July, after rising 0.9 percent in July from June.

Economists polled by XFN-Asia expected inflation at 6.8-7.3 percent in August. The central bank was looking at 6.6-7.1 percent.

For the January-August period, inflation averaged 8.1 percent, much higher than the government's full-year target of 5.0-6.0 percent.

All commodity groups posted lower inflation in August, except for housing and repairs and services.

Core inflation, which excludes selected food and energy items, eased to 6.6 percent in August from 6.8 percent in July, the NSO said.

Food prices alone rose at a slower rate of 5.8 percent from 5.9 percent.

Prices for housing and repairs increased 4.8 percent against July's 4.7 percent, while cost of services grew 10 percent compared to 9.9 percent.

Inflation for food, beverage and tobacco dipped to 5.8 from 5.9 percent, while that of fuel, light and water eased to 18.7 from 18.9 percent, miscellaneous items to 3.3 percent from 3.4 percent, and clothing unchanged at 3.5 percent.

"High oil prices still have got to do with the latest inflation figure," said Victor Abola, an economist at the University of Asia and the Pacific. He said the impact of oil prices on inflation was reflected not only in the movement of prices under the commodity group fuel, light and water, but also in services.

Dennis Arroyo, director of the policy and planning staff of the National Economic and Development Authority (NEDA), inflation would be slower in the second half of the year than in the first half, not only because of the expected improvement in agricultural output but also of the high base in the second half of last year.

The agriculture, fisheries and forestry sector is targeted to grow by 5.1 percent in the second half, compared with 0.7 percent recorded in the first half.

"Bad weather results in supply shortage, and so the rainy months of July, August and September would help improve production and slow down increases in food prices," Abola said.

Abola said average inflation for the full year was likely to settle at between 7.8 and 8.0 percent, assuming that Dubai crude would stay at $56 a barrel in the second half and post a full-year average of $50 a barrel, 48 percent higher than in 2004.

The NEDA projects the full-year inflation for the year at 8.0 percent, while the central bank estimates it at 7.9 percent.

The central bank said that with the level of inflation, it was not ruling out the possibility of again tightening up its monetary policy. With INQ7.net