Philippines inflation to soar 3% in January

Check out what to blame.

According to DBS, January inflation print (due tomorrow) is expected to reach 3% YoY, edging up from 2.9% in the preceding month.

Here's more:

Growth and inflation dynamics have been very favorable over the past year. With 4Q GDP out at 6.8% YoY (6.6% for 2012), and sequentially accelerating for two quarters, it is all the more impressive that inflation has been so low.

That said, price pressures are likely to build over the coming quarters and inflation is set to edge up moderately. Robust domestic demand, boosted by election spending in the first half of the year will contribute towards a higher inflation rate. Moreover, higher 'sin' taxes on cigarettes and alcohol have also kicked in for January. Oil prices will also be critical to watch.

Our core scenario envisages a fairly strong turnaround in the Chinese economy and that should translate into higher oil prices. Over the past month, Brent crude prices have already trended up above USD 115/bbl. Given the high pass-through to consumers, this will be another factor pushing up inflation.

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