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Price growth of NCR construction materials eases in August

By Bernadette Therese M. Gadon, Researcher

BULK prices of construction materials in the capital region decreased by 5.7% year on year in August, the Philippine Statistics Authority (PSA) reported on Friday.

Analysts attributed this to favorable base effects, the global economic slowdown, and the high-interest rate environment.

Preliminary data from the construction materials wholesale price index (CMWPI) in the National Capital Region (NCR) showed that prices were lower compared to the 7% figure in August last year. In July, CMWPI increased by a revised 5.7% annually.

This was the slowest growth in more than a year, or since the 5.2% recorded in February 2022.

Year to date, CMWPI averaged 7.1%.

Commodities that saw slower year-on-year growth rates were fuels and lubricants (-6.6% this year compared to 30.3% a year ago), PVC pipes (-5.1% from 9.8%), and reinforcing and structural steel (3.5% from 10.7%).

Meanwhile, G.I. sheet registered a growth of 12.8% to 16.4% in August this year, up from 3.6% a year ago.

Following that were painting works (10.3% from 7.1%) and doors, jambs, and steel casement (5.1% from 2.2%).

Out of the 17 commodities monitored by the statistics agency, 10 saw slower growth.

Retail prices, tracked by the PSA’s construction materials retail price index (CMRPI), also decreased by 1.4% year on year, down from 6.9%.

This was the slowest growth recorded in more than two years, matching the 1.4% figure from July 2021, and the slowest since the 1.2% in June 2021.

Over the first eight months of the year, CMRPI averaged 3.1%.

The following commodities recorded slower growth rates: miscellaneous construction (-0.7% in August 2023, down from 10.9% in August 2022), tinsmithry (2.9% from 9%), and plumbing (0.4% from 7.5%).

The easing trend seen in the past few months as world prices of most base metals slipped on the risk of US economic slowdown and softer economic data seen in China also contributed to slower price inflation of construction, according to Rizal Commercial Banking Corp. chief economist Michael L. Ricafort.

“Higher interest rates in the US/globally and locally, after the aggressive Fed rate hikes… effectively increased borrowing/financing costs, thereby leading the slower investments and demand for construction materials,” he said in an e-mail.

The weak outlook on the real estate sector also dampened demand for construction materials, according to China Banking Corp. (China Bank) chief economist Domini S. Velasquez,

“Moving forward, however, we may see an uptick in wholesale prices due to the continued increase in global oil prices, which will likely be passed through to retail prices,” she said in a Viber message.

In the coming months, Mr. Ricafort said that the dollar-peso exchange rate may affect import costs on construction materials; however, the continued increase in infrastructure spending, which accounts for at least 5-6% of gross domestic product (GDP), could support demand for construction materials for the rest of the year.

To recall, second-quarter GDP eased further to 4.3% from 6.4% in the first quarter and from 7.5% in the same quarter a year ago due to government underspending and a lack of election-related spending.

Slower global economic growth likewise dragged down the country’s economic performance.

However, the latest data from the Department of Budget and Management showed infrastructure expenditures reached P507.2 billion in the first half of the year, above the P483.1 billion spending program planned for the period.

“The further reopening of the economy towards greater normalcy, with the final lifting of the COVID state of public health emergency since July 22, 2023, could lead to some pick up in construction and other business/economic activities, thereby could also support demand for construction materials,” Mr. Ricafort said.

“Dry weather due to El Nino conditions expected in [the fourth quarter] will also boost construction activity. On the other hand, downward pressure on prices will likely still come from weak real estate demand from high-interest rates,” China Bank’s Ms. Velasquez said.

#Price #growth #NCR #construction #materials #eases #August

Auto Sales (August 2023)

Vehicle sales jump by annual 22% in August

AUTOMOBILE SALES in the Philippines registered a double-digit annual growth in August but saw a month-on-month sales decline amid elevated inflation.

A joint report by the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) showed new vehicle sales rose by 21.6% to 36,714 units in August from 30,185 units in the same month a year ago.

“Consumer demand drives the auto sales further… from an already considered pre-pandemic performance a year prior amidst the above inflation target recorded anew in the same period,” CAMPI President Rommel R. Gutierrez said in a statement.

However, vehicle sales slipped by 1% from 37,086 units that were sold in July, reflecting the impact of rising prices.

Headline inflation unexpectedly picked up to 5.3% in August from 4.7% in July amid rising costs of fuel and food.

CAMPI-TMA data showed commercial vehicles accounted for the bulk of the August sales. Sales of commercial vehicles rose by 13.5% to 26,620 units in August from 23,452 in the same month in 2022.

Month on month, commercial vehicle sales declined by 3.5% from 27,577 units in July.

In particular, light commercial vehicles (LCV) climbed by 16.8% to 20,991 during the month. Month on month, sales of LCVs fell by 2.9%.

Sales of Asian utility vehicles (AUV) dipped by 0.3% year on year to 4,576 in August. AUV sales slumped by 8.3% month on month.

Sales of light trucks increased by an annual 29.5% to 597 in August, while heavy truck sales surged by 50.6% to 128. However, sales of medium trucks went down by 4.7% to 328 units.

Meanwhile, passenger car sales accelerated by an annual 49.9% to 10,094 units in August from 6,733 units a year ago. Month on month, sales of passenger cars rose by 6.15% from 9,509 units in July.

For the first eight months of the year, CAMPI-TMA members sold 276,215 units, increasing by 29.8% from 212,872 a year ago.

“The 276,215 units year-to-date sales of CAMPI-TMA, up by 30% from the same period a year ago — equivalent to 70% of the 395,000 sales forecast is certainly giving optimism of a sustained and even stronger post-pandemic recovery for the auto industry,” Mr. Gutierrez said.

Commercial vehicles, which accounted for 75% of the total industry sales, reported a 28% increase in sales to 205,764 units in the January-to-August period.

Passenger car sales jumped by 35.3% to 70,451 in the eight-month period.

“The auto industry is mindful of the challenges brought by high inflation and its effect on the overall consumer confidence particularly for big-ticket items — not welcome news to the consumers and industry alike if it will persist,” Mr. Gutierrez said.

For the eight-month period, inflation averaged 6.6%. The Philippine central bank is projecting inflation to average 5.6% this year.

Toyota Motor Philippines Corp. (TMP) remained the market leader with a 45.9% share as eight-month sales rose by 16.6% to 126,795.

Mitsubishi Motors Philippines Corp. came in second spot with a 67% surge in sales to 50,439 in the January-to-August period.

In third spot is Ford Motor Company Phils., Inc. as its sales jumped by 47.6% to 19,700 units in the period ending in August.

Rounding out the top five are Nissan Philippines, Inc., which saw a 23.4% increase in sales to 17,873 units, and Suzuki Phils., Inc. whose sales dropped by 7.9% to 11,821 units.

In 2022, CAMPI-TMA members sold a total of 352,596 units. — Justine Irish D. Tabile

#Vehicle #sales #jump #annual #August

Inflation rates in the Philippines

Inflation accelerates in August for 1st time in 7 months

By Keisha B. Ta-asan, Reporter

HEADLINE INFLATION accelerated for the first time in seven months in August, amid a spike in the prices of rice, vegetables and fuel, the Philippine Statistics Authority (PSA) said on Tuesday.

Preliminary data from the PSA showed the consumer price index (CPI) quickened to 5.3% in August from 4.7% in July, but slower than the 6.3% clip a year ago.

This was above the 4.9% median estimate in a BusinessWorld poll conducted last week. However, it settled within the Bangko Sentral ng Pilipinas’ (BSP) 4.8-5.6% forecast range for the month.

August also marked the 17th consecutive month that inflation surpassed the BSP’s 2-4% target range.

At 5.3%, last month’s inflation print was the fastest in two months, or since the 5.4% in June. Stripping out seasonality factors, month-on-month inflation inched up 1.1% in August. 

For the first eight months of 2023, inflation averaged 6.6%, still above the BSP’s 5.6% full-year projection.

Core inflation, which excludes volatile prices of food and fuel, further eased to 6.1% year on year in August. This was lower than the 6.7% seen in July, but above the 4.6% in August last year. 

“Higher prices for oil and key agricultural commodities drove inflation during the month,” the BSP said in a statement.

National Statistician Claire Dennis S. Mapa said inflation was mainly driven by the faster annual increase in the heavily weighted index for food and nonalcoholic beverages to 8.1% in August from 6.3% in the previous month.

Food inflation alone quickened to 8.2% in August from 6.3% in July.

Rice inflation surged to 8.7% in August from 4.2% in July due to tight supply. This was the fastest pace since the 9% print in November 2018 when the country experienced another rice shortage. August also marked the sixth straight month of increase or since 2.2% in February.

Mr. Mapa noted that an increase in rice prices typically signals rising inflation since rice accounts for 8.9% of the total CPI basket for all income households and 17.9% for the bottom 30%.

Bottom 30% inflation rate in the Philippines

Meanwhile, inflation for vegetables, tubers, plantains, cooking bananas and pulses climbed to 31.9% in August from 21.8% a month prior. This was the fastest since 33% in February.

Mr. Mapa said recent typhoons have caused agricultural damage, which drove up prices of vegetables and rice, especially in Central Luzon.

Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said the inflation trend in the next few months will largely depend on food supply.

“The upcoming harvest season for rice may help in stabilizing the price of the commodity. However, local production can only cover around 85% of rice consumption and the country needs to import the rest from abroad,” he said in a note.

Mr. Neri said retail prices may stay elevated in the near term, as global rice prices are at a 12-year high. There may be uncertainties as well on the ability of other countries to supply rice amid the El Niño weather event.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa in a note said the uptick in August inflation was a reversal from the steady downtrend in inflation in the last six months.

“With supply shocks to important food items and imported energy, we could see a resumption of price pressures building up,” he said.

The government on Tuesday began implementing a nationwide price ceiling on regular and well-milled rice as part of efforts to address rising prices of the national staple.

How much did each commodity group contribute to August inflation?

“Another threat we are looking at is the consistent increases in fuel prices (in recent months). If pump prices continue to rise, other commodity items may be affected,” PSA’s Mr. Mapa said.

PSA data showed transport inflation quickened to 0.2% in August from -4.7% in July, ending three months of decline.

In August alone, oil firms hiked fuel prices by P5.90 per liter for gasoline, P9.90 per liter for diesel and P10 per liter for kerosene.

Meanwhile, the inflation rate for the bottom 30% of income households rose to 5.6% in August from 5.2% in July. However, it was slower than the 7.3% print in August 2022.

From January to August, inflation averaged 7.4% for the bottom 30%.

In the National Capital Region (NCR), inflation inched up to 5.9% from 5.6% in July. Inflation in areas outside NCR accelerated to 5.2% in August from 4.4% in July.

The BSP said inflation may remain elevated in the coming months due to the impact of supply shocks on food prices as well as the increase in global oil prices.

Despite the uptick in August, the central bank said it still projects inflation to decelerate to within the 2-4% target by the fourth quarter.

“The BSP stands ready to adjust the monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects in view of the persistent upside risks to the inflation outlook,” the BSP said.

The BSP has kept the key rate steady at 6.25% at its last three meetings. It has raised borrowing costs by 425 basis points (bps) from May 2022 to March 2023 to curb inflation.

According to the BSP, the balance of risks to the inflation outlook remains on the upside due to the potential impact of additional transport fare increases, higher-than-expected minimum wage hikes in other regions, and supply constraints for key food items.

It also cited the El Niño weather phenomenon and the likely knock-on effects of higher toll rates on prices of agricultural products as upside risks to the inflation outlook.

The impact of a weaker-than-expected economic recovery globally remains as the primary downside risk.

“The August upside surprise now has BSP on notice although we doubt one data point will be enough for Governor Eli M. Remolona, Jr. to flip back into tightening mode,” ING’s Mr. Mapa said.

Should inflation for rice, electricity and transportation accelerate further, he said that Mr. Remolona will not hesitate to raise rates to get a hold of inflation expectations.

Finance Secretary Benjamin E. Diokno said that the government is “resolute” in mitigating the impact of inflation on the public.

“While we are seeing a slight uptick, our inflation rate assumption of 5% to 6% for full-year 2023 remains doable,” he said in a separate statement.

With the higher-than-expected August print, Pantheon Chief Emerging Asia Economist Miguel Chanco said they have raised their average inflation forecasts to 5.6% for this year and 2.8% for 2024 from 5.4% and 2.6% previously.

“A return to the BSP’s target range in the fourth quarter still is very much in the cards, from our perspective, given the favorable food base effects from the fourth quarter last year,” Mr. Chanco said in an e-mail.

“We continue to believe that the BSP will cut its benchmark rate by 50 bps in the fourth quarter in order to take pressure off the economy, though the risks to this forecast are now more skewed to the upside,” he added.

For BPI’s Mr. Neri, rate cuts are still premature due to the likelihood of inflation remaining above target in the next six months.

“It should be noted that inflation has been above the target of the BSP for almost two years already. A longer period of above-target inflation may affect the BSP’s credibility as an inflation targeting central bank, which in turn may limit their ability to control inflation,” he said.

“Inflation can easily bounce back given these conditions. With the trade and current account deficit of the Philippines at substantial level, the BSP may find it difficult to decouple its monetary policy from that of the US,” he added.

The next meeting of the Federal Open Market Committee is scheduled for Sept. 19-20, while the BSP’s next policy meeting is on Sept. 21.

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Peso weakens against dollar as market awaits August inflation report

THE PESO inched down against the dollar on Monday as the market awaited the release of the August consumer price index report on Tuesday.

The local currency closed at P56.62 versus the dollar on Monday, weakening by 2.50 centavos from Thursday’s P56.595 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s session weaker at P56.65 per dollar. Its intraday best was at P56.49, while its worst showing was at P56.66 against the greenback.

Dollars traded went up to $1.59 billion on Monday from the $1.48 billion on Thursday.

The peso weakened ahead of the release of August inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“[On Tuesday], we’ll get domestic inflation, which could hint at the BSP’s (Bangko Sentral ng Pilipinas) own policy path,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message.

A BusinessWorld poll of 18 analysts yielded a median estimate of 4.9% for August inflation, near the lower end of the central bank’s 4.8-5.6% forecast for the month.

If realized, this would be faster than the 4.7% in July, but lower than the 6.3% print in August 2022.

It would also mark the 17th straight month that inflation exceeded the central bank’s 2-4% target.

The BSP last month kept benchmark interest rates steady for a third straight meeting, but signaled it is prepared to resume tightening if needed amid risks to inflation.

The Monetary Board left its overnight reverse repurchase rate unchanged at a near 16-year high of 6.25%. Interest rates on the overnight deposit and lending facilities were maintained at 5.75% and 6.75%, respectively.

The BSP has raised borrowing costs by 425 basis points (bps) from May 2022 to March 2023 to help bring down elevated inflation.

The Monetary Board will hold its next policy meeting on Sept. 21.

“We did note some inflows, possibly from remittances, over the long weekend helping offset anxiety over the outlook for the Fed policy stance,” Mr. Mapa added.

The US Federal Reserve raised interest rates by 25 bps in July, bringing its benchmark overnight rate to a range between 5.25% and 5.5%.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The Federal Open Market Committee will next meet on Sept. 19-20 to review policy.

The market expects the Fed to keep rates steady and possibly end its tightening cycle this month following soft economic data.

For Tuesday, Mr. Ricafort sees the peso trading from P56.50 to P56.70 against the dollar. — AMCS

#Peso #weakens #dollar #market #awaits #August #inflation #report