Philippine headline inflation decelerated for the fifth straight month in June to 5.4% from 6.1% in May 2023. The June figure brings the average inflation rate for the first semester of 2023 to 7.2%. Core inflation decelerated as well to 7.4% from 7.7% during the previous month, to bring the YTD 2023 core inflation to 7.7%.<\/p>\n\n\n\n
Slower annual increase in food and non-alcoholic beverages played a significant role to lower headline inflation as it dropped to 6.7% from 7.4% in the previous month. Disinflationary forces were seen in the Food category, mainly brought about by the lower annual price increases in meat at 0.3% during the month from 3.2% in May 2023. A faster annual decrease in transport also contributed to the downtrend of overall inflation. The transport sector experienced a decline of -3.1% during June 2023, compared to -0.5% in May 2023.<\/p>\n\n\n\n
Our View:<\/strong> The recently appointed Bangko Sentral ng Pilipinas Governor Eli Remolona is optimistic that inflation will be within the target range set by the BSP by the end of the year. We agree and if CPI normalizes to its seasonal tendencies, we should see inflation at the maximum to be at 4.4% by December with headline inflation expected to continue along its downward trajectory for the rest of the year. <\/p>\n\n\n\n It is worth noting that the decline in headline inflation can be largely attributed to the high base of comparison from 2022. Comparing the current inflation rate to a period of relatively higher inflation in the previous year creates the appearance of a decrease. In fact, there are early indications of a revival in sequential inflation as it rose by 0.17% in June 2023. This is the first month on month increase in CPI in four months. <\/p>\n\n\n\n This may suggest that moderate inflationary pressures may be starting to build up. Looking ahead, potential inflationary pressures may stem from factors such as higher wages and the El Ni\u00f1o phenomenon.<\/p>\n\n\n\n