A better Christmas

PHILIPPINES - In Brief 05 Nov 2021 by Romeo Bernardo
The government yesterday unexpectedly announced a lowering of Metro Manila’s covid alert level from 3 to 2, which would allow close contact services to operate at 50% capacity (from 30%). This came alongside an increase in the allowable ridership for public transportation to 70% of capacity (from 50%) and the lifting of curfew in the metropolis to enable malls to stay open longer. As we noted in our brief last week, activity has recently picked up with the removal of mobility restrictions on younger cohorts and reminders of pre-pandemic traffic congestion have started.With vaccination of minors beginning as well, businesses are gearing up for government’s promised “better Christmas.” Nevertheless, two data releases this week serve as prompts for us to manage our expectations.Consumers’ purchasing power has been curtailed by elevated inflation with the October headline rate reported at 4.6%, still above the BSP’s target 2-4% target range. Food inflation, at 5.6%, has kept ahead of the headline rate with spikes in fuel and energy prices adding to supply side pressures. Core inflation, which excludes these volatile items and has crept up from 2.9% in July to 3.4% in October, bears monitoring as well. Although the headline rate may fall back within target as soon as this month, we share the common worry among analysts these days about the varied hard-to-predict sources of price shocks, including supply bottlenecks, that could be amplified by stronger than anticipated demand increases.[1]CHART 1.Headline, core, and food and energy inflationSource: PSA, authors’ computationsCHART 2.Contribution to October inflation (yoy)Source: PSA, authors’ computationsThe waves of infectio...

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