| Inflation slows in August ANNUAL INFLATION eased slightly in August, giving the Bangko Sentral ng Pilipinas (BSP) room to keep rates steady amid sagging economic growth. “[The latest inflation figure] confirms our assessment that the inflationary pressures have moderated and that inflation is now going to be within the target range of the BSP,” central bank Governor Amando M. Tetangco, Jr. told reporters yesterday at the sidelines of an economic forum in Pasay City. “We will have to continue to monitor the developments. But barring any surprises on the inflation side, I do not see any urgency for changing the monetary policy stance at this point and in the near future,” Mr. Tetangco said. The latest consumer price index (CPI), reckoned from 2006 prices and with new components, placed annual inflation at 4.7% last month, slower than July’s 5.1%. Based on the old series, which uses 2000 prices, August inflation stood at just 4.3%, down from 4.6% in the prior month. Using the old series, the August figure -- a four-month low -- was within the BSP’s 3.9-4.8% forecast and lower than the 4.53% median in a BusinessWorld poll. Analysts’ and official outlooks are still based on the old series. The National Statistics Office (NSO), in announcing the August data, said: “[the] continued deceleration in the annual increment in the heavily weighted food and non-alcoholic beverages index caused headline inflation to continue to move up at a slower rate.” Core inflation, which excludes volatile price movements of products such as food and fuel, also slowed to 3.4% in August from 3.7% in July based on the old series. “It looks like we have more flexibility in the monetary side now given that the inflation rate has actually declined from the previous [month] and considering the fact that we need to provide support to productive activities,” Mr. Tetangco said. Gross domestic product growth slowed markedly to 3.4% in the second quarter, pulled down by a plunge in investments on public construction. “[W]e are poised to meet the full-year inflation target,” Mr. Tetangco also said in a text message to reporters. The average year-to-date inflation rates of 4.3% (2000 prices) and 4.8% (2006 prices) are still within the central bank’s 3-5% target for 2011. HSBC regional economist Trinh D. Nguyen, in a research note, said inflation eased “more than expected primarily due to the decline of food prices.” “With inflationary pressures now largely contained, the BSP has some room to focus on growth, which decelerated more than expected in the second quarter,” she added. “Given the decline of inflationary pressures and weaker growth prospects, we expect the BSP to hold the policy (borrowing) rate at 4.5% at their next meeting. While the next move is still likely to go up, we don’t expect a hike before the second quarter of 2012.” Cid L. Terosa, senior economist at the University of Asia and the Pacific, agreed, saying that inflation eased in August because there were “no remarkable changes the prices of food, petroleum and petroleum products and utilities.” “Although oil prices alternately increased and decreased during the month, there was no sustained upward pressure from rising oil or gasoline prices. Aside from that, food prices did not rise considerably in August,” Mr. Terosa said. The Monetary Board, he added, will “maintain policy rates because inflationary pressures have been contained.” Echoing the view, University of the Philippines economist Benjamin E. Diokno said: “The BSP should focus on sustaining growth and should keep interest rates unchanged.” Rizal Commercial Banking Corp. Senior Vice-President Marcelo E. Ayes, for his part, said: “The August figure is the confirmation for the BSP’s outlook that inflation will ease in the coming months and with commodity prices going down, there is no more pressure for the BSP to increase policy rates.” Right now “growth outweighs inflation risk outlook,” Mr. Ayes pointed out. The BSP has hiked key rates twice this year to keep inflation from breaching the 3-5% target. Overnight borrowing and lending rates stand at 4.5% and 6.5%, respectively. It moved to adjusting the bank reserve requirement during the last two policy meetings as liquidity became the main concern. The policymaking Monetary Board is scheduled to review the central bank’s key rates tomorrow. NSO data showed that annual price increases in the heavily weighted food and non-alcoholic beverages index slowed to 5.1% in August from 5.7% in July based on the new CPI. The indices for housing, water, electricity, gas and other fuels also moderated to 5.1% from 5.4%. Indices for clothing and footwear, recreation and culture, and education eased to 3.8%, 1.5% and 5.1% from 4.2%, 1.6% and 5.2%, respectively. Experts, however, said there might be a slight uptick in inflation for September. “For September, inflation will be a bit higher but not exceeding 5%, because of impending increases in toll fees and oil prices,” Mr. Terosa said. De La Salle University economist Mitzie Irene P. Conchada concurred, saying: “With the recent increase in price of gasoline products at the start of September, prices of basic commodities may be affected and this could bring inflation slightly higher than August.” “With the economy weakening, September inflation is likely to hover around 4.5% (2000 prices),” Mr. Diokno said in a text message. -- Judy Dannibelle T. Chua Co with a report from Neil Jerome C. Morales |
| Stocks in U.S. Drop on Euro Zone Debt Crisis; S&P Pares Loss in Final Hour U.S. stocks fell, giving the Standard & Poor’s 500 Index its longest slump in almost a month, amid concern that Europe’s debt crisis is worsening. Equities pared losses in the final 30 minutes of trading. The benchmark measure trimmed its drop from 2.9 percent as companies most-tied to economic growth rebounded, propelling the Morgan Stanley Cyclical Index to a 0.2 percent gain for the day. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) decreased more than 3.4 percent on concern about a global financial crisis. Exxon Mobil Corp. (XOM) and Alcoa Inc. (AA) lost at least 1.3 percent on speculation that demand for commodities will slow. The S&P 500 lost 0.7 percent to 1,165.24 at 4 p.m. in New York. The benchmark gauge has fallen 4.4 percent in three days, the longest drop since Aug. 8. The Dow Jones Industrial Average slumped 100.96 points, or 0.9 percent, to 11,139.30 today. “The big worry is the situation in Europe,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. “Until we have some resolution of that crisis, we’re going to have continued turbulence in the market. I still think the chance of a recession is less than 50 percent. However, there’s the risk that sentiment just turns so negative that people crawl back into their holes and we do have another downturn.” The U.S. stock market was closed yesterday for a holiday, as global equities fell, Italian bonds dropped for an 11th day and the cost of government and bank default insurance rose to records amid concern about Europe’s debt crisis. Treasury 10-Year Yields Fall to Record on European Sovereign-Debt Concern Treasury 10-year note yields decreased to an all-time low as concern Europe’s sovereign-debt crisis will cripple the region’s financial institutions underpinned demand for the safest assets. Yields on 30-year bonds touched the lowest level since January 2009 on speculation Federal Reserve Chairman Ben. S. Bernanke may signal in a speech this week that the central bank will purchase longer-duration debt while shedding shorter maturities. Ten-year notes are the most overvalued ever, according to a financial model created by Fed economists that includes expectations for interest rates, growth and inflation. Stocks dropped. “The fear is that the debt contagion is not abating,” said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. “Because of the global stock meltdown, flight to quality came into play. The safest bet would be to jump into dollar-denominated assets, like Treasuries. The Fed will have to do something to stimulate the economy, and the only way to do that is to buy Treasuries.” The benchmark 10-year note yield was little changed at 1.98 percent at 5:21 p.m. in New York, according to Bloomberg Bond Trader prices. The price of the 2.125 percent securities maturing in August 2021 closed at 101 1/4. |
| Oil Gains on Forecast Supply Drop; Weather System Builds in Gulf of Mexico Oil advanced from the lowest in more than a week in New York as investors bet that shrinking crude stockpiles and a storm building in the Gulf of Mexico indicate demand will outpace supply in the U.S., the world’s biggest consumer of the commodity. Futures gained as much as 0.6 percent. An Energy Department report tomorrow may show supplies declined 2.25 million barrels last week, a Bloomberg News survey of analysts show. A disturbance in Mexico’s Bay of Campeche has a 30 percent chance of becoming a tropical depression or storm, according to the National Hurricane Center. Crude for October delivery rose as much as 54 cents to $86.56 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.49 at 8:45 a.m. Sydney time. The contract yesterday slid 43 cents to $86.02, the lowest close since Aug. 26. Prices are 17 percent higher the past year. Brent oil for October settlement climbed $2.81, or 2.6 percent, to $112.89 a barrel on the ICE Futures Europe Exchange yesterday. The European benchmark contract reached a record premium of $26.87 to U.S. futures, breaching the previous high of $26.21 set Aug. 19. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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