December inflation drops

PHILIPPINES - In Brief 04 Jan 2019 by Romeo Bernardo

The headline inflation rate fell sharply to 5.1 percent from 6.0 percent in November, with the price level falling for the second straight month. Similarly, core inflation eased to 4.7 percent in December from 5.1 percent in the previous month, indicating diminishing second round impacts.The lower December inflation outturn was due mainly to slower increases in the prices of food items, particularly rice, vegetables, and sugar as supply-side issues subsided. The decreases in gasoline and diesel prices also drove down transport inflation. Meanwhile, higher annual mark-ups were noted for clothing and footwear, as well as health care.The latest inflation print is slightly below our own forecast for the month (5.2%) and brings full year 2018 inflation rate to 5.2%, which exceeds the BSP’s inflation target of 2-4%. Nonetheless, with an expected freer rice importation regime and more stable global oil prices, inflation is expected to fall within the BSP’s target range this quarter.TABLE 1Major Sources of Inflation in December 2018**2012=100Note: Some figures may not exactly add up due to rounding Source: Philippine Statistics Authority (PSA)

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