“In August, the Philippines saw a decrease in bulk prices compared to last year, attributed to the influence of high global crude oil prices. The month-on-month growth was also affected by a weaker peso and storm damage in July, according to the Philippine Statistics Authority (PSA) on Friday.”
According to initial figures from the PSA, the overall wholesale price index (GWPI) indicates a 5% decrease in bulk prices for the country in August compared to the same time period last year. However, when looking at a monthly comparison, the August rate was higher than the rate in July of 4.5%.
The increase was in line with May’s numbers and marked the highest growth in six months, since February’s 6.8% growth.
From the beginning of the year until now, the GWPI has averaged at 5.1%, which is lower compared to the 7.3% from this time last year.
The GWPI rates for all island groups were lower in August of this year compared to the same time last year. Luzon’s rate decreased from 8% to 5%, the Visayas from 6.2% to 4.2%, and Mindanao from 4.3% to 3.4%.
According to Michael L. Ricafort, the Chief Economist of Rizal Commercial Banking Corp., the moderate increase in wholesale prices is a result of the higher base effects from last August’s global crude oil prices. In August of last year, the prices reached $89, while this year they were at $83.
“In an email, he stated that wholesale prices had increased at a rate greater than 4.5% in July 2023 compared to the previous month, attributing this to the rise in global crude oil prices. This increase was a result of output cuts made by Saudi Arabia and Russia in an effort to stabilize and prevent further decline in world crude oil prices.”
The decline in mineral fuels, lubricants, and related materials was the main factor behind the lower GWPI in August, with a decrease of 6.8%. This was a significant change from the 38.5% increase observed in August 2022.
Next, there was a decrease in the prices of food items, dropping from 12.4% to 7.9%, and a decrease in the prices of beverages and tobacco, going from 8.9% to 6.2%.
Commodities that logged faster growth were miscellaneous manufactured articles (4.4% in August this year compared to 2.8% from August 2022), manufactured goods classified chiefly by materials (5.3% from 3.9%), and crude materials, inedible except fuels (-4.9% from -5.8%).
According to Mr. Ricafort, the monthly growth was higher due to the decrease in the value of the peso from P54.88 in July to P56.595, resulting in increased prices for imported goods during that time.
In the final weeks of July, two typhoons (Doksuri and Khanun) struck the country, resulting in flooding in certain areas.
According to Mr. Ricafort, the rise in food prices was primarily due to damage and affected particularly vegetables and farm products. The rise in rice prices, despite being regulated, also contributed to the overall price hike in August.
According to Mr. Ricafort, prices may increase in the next few months due to seasonal influences as the Christmas season approaches. The rise in the third quarter, as industries gear up for seasonal demand, could also result in higher bulk prices.
Additionally, it is anticipated that there will be an uptick in prices due to the raised minimum transportation fees starting on October 8, 2023. Wage increases in other regions may also contribute to a potential secondary inflation impact.
According to Mr. Ricafort, an increase in inflation may result in a rise in policy rates, which could also raise borrowing and financing expenses at the wholesale level. This could then potentially have a negative impact on demand, investments, and other business and economic activities.