RP inflation at 50-month low

PHILIPPINE NEWS SERVICE — Inflation eased to 2.6 percent year-on-year in February from 3.9 percent in January, as the combination of strong peso, stable food supply and oil price cuts helped reduce the level of price movement to its slowest rate in 50 months.

The National Statistics Office said the February inflation was the lowest rate in more than four years since it was registered at 2.5 percent in December 2002. Inflation a year ago was 7.6 percent.

This also put the average inflation in the first two months of 2007 at 3.2 percent, below the government’s target range of 4 to 5 percent for the year. Headline inflation averaged 6.2 percent in 2006.

Prices month-on-month fell 0.1 percent in February, compared to the 0.3 percent increase in January, after oil companies reduced the pump prices of liquefied petroleum gas, kerosene, gasoline and diesel. Retail prices of rice, fruits, vegetables and meat also went down because of sluggish sales.

Economic Planning Secretary and National Economic and Development Authority director general Romulo Neri said the strong peso, spurred by solid economic fundamentals, helped tame the country’s inflation.

Year-on-year core inflation, which excludes selected food and energy items, also slowed to 3.0 percent in February from 3.9 percent in January.

The NSO announced the inflation figure two days before the meeting of the Monetary Board of the Bangko Sentral ng Pilipinas, which will discuss policy interest rates. Analysts were expecting the central bank to adjust the overnight borrowing and lending rates, given the deceleration in inflation.

Members of the board, however, declined to comment on whether such adjustment was necessary at this time.

By commodity group, year-on-year inflation rate for food improved to 3.0 percent in February from 4.3 percent in January; clothing, 2.7 percent from 3.0 percent; housing and repairs, 2.3 percent from 2.9 percent; fuel, light and water, 1.5 percent from 4.6 percent; services, 2.4 percent from 3.7 percent; and miscellaneous items, 2.0 percent from 2.4 percent.

Services include educational, medical, personal, recreation, transportation and communication, and others while miscellaneous items include household furnishing and equipment, household operations, personal care and effects, and other miscellaneous items.

On a monthly basis, prices of fruits and vegetables went down by 2.8 percent as deliveries in the markets “proved to be more than the requirements of consumers.”

“In addition, sluggish retail trade in National Capital Region allowed prices during the last week of the month to remain at first week’s prices for most indicator vegetables. Favorable weather conditions in major producing provinces in Luzon, particularly for the pinakbet vegetables [regions] during the month also contributed to downward price adjustments,” the NSO said.

It said ample supply of chicken, pork and beef in Metro Manila markets and in some regions during the month pushed down the meat index.