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22nd of July 2018

Economy



Finance sees June inflation hitting a high of 4.9%

Inflation likely climbed to 4.9 percent year-on-year in June, which would be the highest in more than five years, due to a low base from last year, the higher prices of vegetable and “sin” products and increased education-related costs at the start of the school year, the Department of Finance said yesterday.

In an economic bulletin, Finance Undersecretary and chief economist Gil S. Beltran said consumer prices last month inched up 0.35 percent from levels in May.

“The month-on-month inflation adjustment may be due mainly to two items—the 2.43-percent month-on-month rise in prices of education[-related goods and services] during the opening of classes, and 2.27-percent rise in vegetable prices that usually accompanies incessant rains at the onset of the wet season,” Beltran explained.

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June marked the start of the rainy season.

Compared to a year ago, headline inflation in June last year was a low of 2.5 percent, hence the year-on-year spike, he said.

“Food prices contributed to the year-on-year uptick mainly due to vegetables, while month-on-month inflation of fish and rice prices moderated to 0.11 percent and 0.1 percent, respectively,” Beltran said.

“The price increase on sin products continues to be double-digit year-on-year, even as the month-on-month rate plunged to 0.3 percent from 0.81 percent last May. For the June inflation rate, sin products contribute as much as 0.46 percentage points year-on-year,” Beltran added.

The latest DOF data showed that the rate of increase in the prices of alcoholic beverages and tobacco jumped 20.44 percent year-on-year in June. Prices of tobacco products, alone, rose by a faster 27.82 percent.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the unitary excise tax on cigarettes rose to P32.50 per pack effective Jan. 1 from P30 a pack last year.

Also, the excise tax rates on alcoholic drinks go up every year under the Sin Tax Reform Law of 2012.

Starting July, the unitary excise tax on cigarettes will further rise to P35 per pack, as provided in the TRAIN Law.

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Beltran said their average prices of non-food commodities rose 0.33 percent month-on-month, “driven by education and petroleum products, but tempered by the decline in electricity rates.”

The government will release the June inflation figure on Thursday. —BEN O. DE VERA

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