Philippines: Inflation surprised to the upside in September – UOB

The Philippine’s headline inflation marched up to 6.1% y/y in Sep (from +5.3% in Aug), exceeding our estimate (+5.6%) and Bloomberg consensus (+5.3%). It also marked the highest level in four months, predominantly triggered by costlier food items (particularly rice, cereals, vegetables, fruits & nuts), transport, healthcare, education, and recreation, sport & culture services.   

We maintain our full-year inflation forecasts at 6.0% for 2023 (BSP est: 5.8%, 2022: 5.8%) and 3.5% for 2024 (BSP est: 3.5%) as risks are still tilted to the upside. The provisional jeepney fare hike by PHP1 starting 8 Oct this year is expected to raise the national inflation by 0.1-0.2ppt amid the lifting of rice price cap on Wed (4 Oct). The Land Transportation Franchising and Regulatory Board will conduct another hearing on 7 Nov for the permanent PHP5 fare increase appeal of three transportation groups in the country. This alongside the potential impact of higher minimum wage adjustments in other regions and knock-on effects of higher toll rates on prices of key agricultural goods, as well as rising global commodity prices are key upside risks to the near-term inflation outlook.