Philippines: Inflation unexpectedly rebounds in August – UOB

The Philippines’ headline inflation reverted higher to 5.3% y/y in Aug after easing for six straight months to 4.7% y/y in Jul. The reading defied our expectation of a slowdown to 4.6% and Bloomberg consensus of a steady rate at 4.7%. This outturn was particularly due to a sharp jump in prices of food and fuels following the transitory effects of two super typhoons (Egay and Falcon) striking the country last month. Costlier recreation, sports & culture related goods and secondary education services also contributed to the acceleration in Aug’s headline inflation.      

New circumstances such as the event of super typhoons, a further acceleration in global oil price above USD90/bbl, and emerging staple food supply shocks have posed a material change in the near-term inflation trajectory. This is in addition to lingering concerns about additional transport fare hikes, higherthan-expected minimum wage adjustments in other regions, and possible knock-on effects of higher toll rates on prices of key agricultural goods on the local front. Hence, we revise our full-year inflation forecasts back to our initial projections made in Feb, at 6.0% for 2023 (from 5.3% previously, BSP est: 5.6%, 2022: 5.8%) and 3.5% for 2024 (from 2.5% previously, BSP est: 3.3%). This upward revision also pushes back our earlier expectation of inflation returning to BSP’s 2.0%-4.0% medium target range to 1Q24 from 4Q23.