The Philippine Statistics Authority (PSA) reported that the Philippine inflation or consumer price index rose to 8.0% in November, 0.3% higher than October\u2019s 7.7%, mainly on the back of higher food prices. <\/p>\n\n\n\n
Core inflation, which excludes food and energy items, printed at 6.5% from 5.9% the previous month. The prices of vegetables, tubers, plantains, and legumes spiked by 25.8% from the previous year, which the PSA attributes to spillover effects of Severe Tropical Storm Paeng (Nalgae) which hit the country at the end of October. <\/p>\n\n\n\n
According to estimates from the Department of Agriculture, Paeng caused P2.86 billion in damages to the agricultural sector and reduced agricultural output by 116,291 metric tons. Paeng affected a total of 86,574 hectares of farmland as far north as the Cordillera Administrative Region and all the way down to Soccsksargen (Region XII) in Mindanao.<\/p>\n\n\n\n
The median forecast for November inflation was 7.8%, which is only slightly lower than the actual figure. The BSP also telegraphed quite clearly that it is expecting an inflation range of 7.4% to 8.2% for the last two months of the year. As such, the 8.0% print was somewhat expected and that is obvious in the way that the market seems to have shrugged off the inflation report. <\/p>\n\n\n\n
On the policy side, as long as inflation remains within the BSP forecast, it is unlikely that the BSP will deliver a rate hike that is higher than the 50 bps expected by analysts.<\/p>\n\n\n\n
There are also encouraging signs, with the month-on-month increase in inflation starting to ease and with the rise in food prices being mostly attributed to a one-off event rather than a broader trend. The strengthening peso and easing oil prices should also help temper inflation in the coming months.<\/p>\n\n\n\n
If we have to make a fearless forecast, we expect inflation to peak at around 8.2-8.4% in the next two months before starting to trend lower. In the meantime, there are a few listed companies that should provide a high enough dividend yield to buffer against inflation, such as SCC (14.9% dividend yield per annum), DMC (11.6%), TEL (8.7%) and SGP (8.6%).<\/p>\n\n\n\n