The country’s headline inflation rate for the month of October declined to 4.9%. This was much lower than the previous month’s 6.1% and brings the year-to-date average inflation to 6.4%. Core inflation decreased further to 5.3%, down from 5.9%in the previous month. <\/p>\n\n\n\n
The main driver behind the decrease in overall inflation for October was the slower year-on-year increase in the heavily-weighted food and non-alcoholic beverages, which decreased to 7.0% from 9.7% in the previous month. Despite the decline, food and non-alcoholic beverages still contributed 2.6 percentage points to overall inflation. Restaurants andaccommodation services also contributed to the decline, with an inflation rate of 6.3% compared to 7.1% in September 2023. Rice inflation went down from 17.9 in September to 13%.<\/p>\n\n\n\n
Our View:<\/strong> Following a negative surprise last month, October’s inflation data brought a pleasant surprise this time around. The latest headline figure was much better than the consensus projection of 5.3%. Notably, October marked the first month-on-month decline in inflation in five months. <\/p>\n\n\n\n This development opens up the possibility for the Bangko Sentral ng Pilipinas (BSP) to hit the upper bound of its target range, set at 4%. However, we believe that it is more likely to be hit in the 1st quarter of next year. Despite the coming holiday season spending, we anticipate that inflation will continue its downward trajectory until February 2024. <\/p>\n\n\n\n It’s important to note that the CPI base for the first quarter of 2023 was elevated, mainly due to a substantial 1.69% sequential increase in January 2023. As a result of these recent developments, we have adjusted our full-year forecast for 2023 to 6.1%, while our projection for 2024 has also been revised down to 5.2%. <\/p>\n\n\n\n Rice inflation, which was once a concern, has now become less worrisome, thanks to the Department of Agriculture (DA) ensuring sufficient inventory to cover 90 days’ worth of demand. This enhanced supply is attributed to increased production and India’s commitment to exporting rice to the Philippines. <\/p>\n\n\n\n Lastly, the positive surprise will likely prompt the BSP to pause on its November 16 meeting.<\/p>\n\n\n\n