Producer Inflation Posts Mild Increase in November

Factory gate prices in the Philippines ended a 10-month contraction streak, recording a 0.3% year-on-year growth in November 2024, according to data from the Philippine Statistics Authority (PSA). The mild increase benefits consumers while creating favorable conditions for further interest rate cuts by the Bangko Sentral ng Pilipinas (BSP).

Key Drivers of Growth

• Computer, electronic, and optical products saw a sharp increase, with prices growing by 3.1%, up from 2.1% in October.
• Transport equipment prices rose by 2.1%, and food products saw a 2.4% uptick.
• In total, 11 sectors posted annual increases in producer prices, while 8 sectors saw declines.

Economic Context

The uptick in the Producer Price Index (PPI) comes after 10 consecutive months of decline, bringing the 11-month average PPI to -0.8% for 2024. This modest growth is attributed to:

• Increased demand during the holiday season.
• Supply chain disruptions caused by late-season typhoons.

Inflation Trends and Monetary Policy

• The country’s headline inflation slightly rose to 2.5% in November, remaining within the BSP’s 2.3%-3.1% forecast range for December 2024.
• The Bangko Sentral ng Pilipinas ended 2024 with a third quarter-point rate cut, signaling potential for additional monetary easing in 2025 to support the slowing economy.
• Average inflation for 2024 is expected at 3.2%, the first target-consistent annual reading since 2020.

Outlook

The PSA is set to release the December and full-year 2024 inflation data on January 7, 2025. If projections hold, the BSP’s efforts to balance inflation management and economic growth may lead to further adjustments in monetary policy.