Train law pushes January inflation to 4%

HIGHER food and non-alcoholic beverage prices mainly pushed the country’s inflation rate to four percent in January.

Inflation is the movement of prices of basic goods and services over a period of time.

December 2017’s inflation stood at 3.3 percent. Last month’s inflation was likewise higher compared to the same period last year, which was at 2.7 percent.

“The uptrend was primarily due to the higher annual increment in the heavily-weighted food and non-alcoholic beverages index as it accelerated by 4.5 percent from previous month’s growth of 3.5 percent,” said the Philippine Statistics Authority (PSA) in a report yesterday.

Price movements for alcoholic beverages and tobacco, likewise, registered double-digit annual markup at 12.3 percent in January from 6.4 percent in December.

Faster inflation was also noted on other indices, namely furnishing, household equipment and routine maintenance of the house; health; transport and restaurant and miscellaneous goods and services.

Excluding volatile food and oil, core inflation jumped to 3.9 percent from the previous month’s three percent.

“The higher January 2018 reading was expected by the Bangko Sentral ng Pilipinas (BSP) although it is at the top end of our forecast for the month. Due mainly to combined first round effects of TRAIN, oil prices, and food to some extent. We think these are temporary drivers of inflation and would eventually stabilize,” said Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr., in a statement.

Espenilla assured that the BSP will be closely monitoring the situation and stands ready to take action based on their evaluation of relevant data.

The government’s first tax reform package took effect at the start of this year.

The Tax Reform for Acceleration and Inclusion (TRAIN) lowers the personal income tax of salary earners but raises the excise tax on a host of goods and services, including fuel, cars, sweetened beverages, tobacco, coal, oil products and cosmetic procedures.

Meanwhile, the PSA reported that prices at the start of the year generally increased by one percent from December’s 0.3 percent.

The hike was primarily attributed to higher annual growth in food and non-alcoholic beverages and tobacco index at 1.5 percent and in alcoholic beverages and tobacco index at 5.9 percent.

PSA reported weather disturbances that occurred during the month affected supplies of fish and vegetables in the markets. This factor pushed up their prices in most of the regions.

The implementation of TRAIN also raised prices of cigarettes and alcoholic beverages in most of the regions.

In a separate interview, the Philippine Association of Meat Processors Inc. (Pampi) remains on a wait-and-see mode on the impact of the government’s tax reform program on food prices.

Although they already anticipate a price increase, Pampi president Felix Tiukinhoy said they don’t have any idea yet as to how much the spike in goods will be.

“There would definitely be a price increase, but as to how much we don’t know yet. We are waiting to see how this TRAIN law would affect pricing of raw materials,” said Tiukinhoy, also president of Virginia Foods Inc.

The Pampi official said the law is expected to affect the logistics and production components of any food manufacturing business.

Tiukinhoy said the meat processing industry grew by 10 to 12 percent in 2017. The industry has yet to make projections on growth this year, pending the effects of TRAIN.

“We don’t have a clear picture on how the consumers would react to the changes, if the tax reform would affect spending habits or if there is only a certain sector in the market that will be affected,” he said.

Tiukinhoy said impact may be felt toward the second quarter of the year and price adjustments might kick in on the third quarter.
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