Economists view fuel price surge offsetting food CPI stability
Inflation in June likely quickened to an average 1.47 percent from 1.3 percent in May, based on forecasts by 10 economists polled by Malaya Business Insight over the weekend.
During the month, the economists observed upward price pressures coming from the global oil markets amid the eruption of hostilities between Iran and Israel.
Although food inflation remained largely steady, the analysts cited a surge in fuel prices, largely attributed to the Middle East conflict.
In contrast, utilities and other core items remained stable.
The Philippine Statistics Authority (PSA) will release the official inflation report on Friday, July 4.
Fuel costs up, food stable
May marked a six-year low in headline inflation, but June may have reversed that trend, economists warned.
While rice prices sustained their slow decline, domestic fuel costs rose sharply in the third and fourth weeks of June following the Iran-Israel conflict, ING’s Deepali Bhargava said.
“The surge in global oil prices translated into higher local pump prices,” Bhargava, who gave one of the two highest forecasts at 1.6 percent, said. “But we believe this will prove temporary, with a likely drop in pump prices by July.”
Metrobank’s Nicholas Mapa, who also forecast 1.6 percent, said “electricity prices and the cost of some non-rice food items” added to inflationary pressures, even as rice deflation and lower pump prices toward month-end provided a counterbalance.
Other economists, including HSBC’s Aris Dacanay, pegged inflation at 1.5 percent, highlighting divergent price movements throughout the month.
“Energy prices moved in opposite directions,” he said. “Retail gas prices jumped mid-June but moderated later. Meanwhile, Metro Manila’s electricity rates fell 0.9 percent month-on-month due to lower generation charges.”
Dacanay also observed mixed signals in food prices: meat and poultry prices climbed, particularly dressed chicken, which rose from P198 to P210 per kilo, while rice prices dipped slightly to P40.95 per kilo.
‘V’-shaped recovery
UnionBank chief economist Ruben Carlo Asuncion also expects inflation to register 1.5 percent for June, which he sees as the start of a “V-shaped recovery” from the May low.
We see inflation gradually rising to 2 percent by September and closing 2025 at around 2.5 percent,” Asuncion said, noting the forecast remains well within BSP’s 2 – 4 percent target for the year.
He said global risks — such as US tariff shifts and Middle East instability — may nudge inflation upward, but China’s export of deflationary goods may continue to offset imported price pressures, especially since China accounts for more than 28 percent of Philippine imports.
Oil price – inflation link
Michael Ricafort of RCBC, who also forecast 1.5 percent inflation for June, emphasized the link between oil prices and broader inflation.
“Every $10 increase in global crude raises the country’s oil import bill by $150 million a month,” Ricafort said. “If supply disruptions occur — especially at the Strait of Hormuz, which handles 20 percent of global oil shipments — that could lead to a spike in headline inflation.”
BPI’s Emilio Neri Jr. and Moody’s Analytics Sarah Tan offered more conservative forecasts at 1.4 percent, citing moderate food inflation and lagging pass-through effects from higher oil prices.
ANZ, which also pegged inflation at 1.4 percent, said disinflation in food and transportation costs may have been offset by rising housing and utilities inflation.
Economist Jonathan Ravelas stood by a 1.3 percent forecast, suggesting that June inflation likely held steady, though he acknowledged a degree of upside risk.
“If conflict escalates in the Middle East, it could push fuel and transport prices higher,” he said. “This would not only stoke inflation but could also strain the trade deficit and impact overseas remittances — especially if OFWs are affected by regional instability,” he said, referring to overseas Filipino workers.
Emerging risk
While inflation in June is still expected to remain within manageable territory, the economist consensus underscores emerging risk from geopolitics and weather-related events.
The mean forecast of 1.47 percent reflects a cautious view that June may mark a turning point from the low seen in May.
Looking ahead, analysts will be watching not just fuel prices, but how domestic food supply, typhoon activity and consumer demand evolve in the second half of the year. ~*~
