The lower inflation rate in October is very much predictable. Rice prices as well as those of other food items cooled off during the month after climbing in September, thanks partly to a good weather.
Base effect, or the much higher inflation rate of 7.7 percent in the comparative month last year, likewise led to a deceleration in prices in October. The inflation on food and non-alcoholic beverages dropped, pulling down the overall prices in October.
The October inflation rate declined significantly to a three-month low of 4.9 percent from 6.1 percent a month ago. The prices of heavily-weighted food and non-alcoholic beverages fell to 7.0 percent in October 2023 from 9.7 percent in September.
As I’ve written in my last week’s column, the yellowing rice fields along major expressways in the north were part of the telltale signs that the nation’s rice stocks had been boosted. The rice inflation shrank to 13.2 percent in October from 17.9 percent in September.
National Economic and Development Authority Secretary Arsenio Balisacan says rice inflation slowed down following the onset of peak harvest and import arrivals.
“The stable supply of vegetables as harvest season comes likewise resulted in a slower inflation rate of the commodity,” says Balisacan.
Meanwhile, food inflation at the national level, according to the Philippine Statistics Authority, decreased to 7.1 percent in October from 10.0 percent in the previous month and 9.8 percent year-on-year. The PSA noted that prices of other food items such as vegetables, tubers, plantains, cooking bananas and pulses, or beans, sharply dropped to to 11.9 percent in October from 29.6 percent in September.
The inflation rate may have already peaked this year, given the ample rice harvest during the wet season. The Department of Agriculture has already assured sufficient rice supply in early 2024 following the harvesting of palay, or unhusked rice, in the current wet season. Rice imports that arrived in the third quarter of 2023 will also help the country’s stock.
DA Assistant Secretary Arnel de Mesa said the country’s national rice stock inventory was at a comfortable level of 77 days of supply in October. Once the wet season harvest ends this month, the national stock inventory is expected to last for 94 days.
The dry spell, however, may pose a problem and restrict crop production. A moderate El Niño is expected to strengthen until the second quarter of 2024. A below-normal rainfall across the country may adversely impact agriculture production and energy generation.
Positive Meralco rating
Improving operations at the least possible cost is the objective of any utility company. And increasing the bottom line is perhaps the most relevant measurement of this quarterly or yearly performance.
Manila Electric Co., or Meralco, the biggest retailer of electricity, is one utility that has to continuously upgrade its service to customers in a challenging regulatory environment. But first, it has to be profitable to meet its customer mandate efficiently and invest for the future.
Latest statistics show that Meralco is fulfilling its objectives, justifying it credit rating upgrade from S&P Global Ratings. Consolidated core net income in the nine months ending September 2023 jumped 53 percent to P30 billion from P19.6 billion during the same period last year.
Higher distributed energy volumes, the robust performance of the power generation business and the expanding contribution of its retail electricity business have powered the company’s operations in the nine-month period.
These improved financial results are underpinned by remarkable strides in operational efficiencies, as exemplified by the company’s 12-month moving average system loss, which showed a significant improvement of 0.07 percentage points from 5.88 percent to 5.81 percent.
Meralco made significant improvements in its service quality metrics. The System Average Interruption Frequency Index (SAIFI), which measures how often customers experience sustained power interruptions, improved five percent to 1.004 times from the 1.053 times reported in the same period the previous year.
The System Average Interruption Duration Index (SAIDI), which reflects the average duration of interruptions per customer, meanwhile, saw a three-percent enhancement, with a reduction to 99.583 minutes, compared with 102.590 minutes during the same period in 2022.
Meralco’s positive numbers followed the decision of S&P Global Ratings to revise its outlook for utility it from “stable” to “positive.” The upgrade reflects Meralco’s robust cash flow and strengthened financial position.
“Strong dividends from Meralco’s associate/joint-venture companies in the power generation business, mainly PacificLight Energy Pte. Ltd. and San Buenaventura Power Ltd. Co., will also support stronger cash flow over the next two years. In addition, contribution from its three commissioned renewable plants (mostly solar projects) will add to the earnings over the next two years,” says S&P.
The credit rating agency has conveyed its confidence in Meralco’s business strategy decisions.
“We believe Meralco has an adequate governance framework that is in line with that of domestic peers. This reflects management’s experience and expertise in power distribution. In our view, the two strategic shareholder groups also exercise sufficient checks and balances, despite a lower proportion of independent directors on the board,” adds S&P.
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