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The Philippines reported another nosebleed inflation number for the month of July today, at +12.2%. Since their central bank interest rate is still under 6%, they’ll need to raise rates further, or risk a wage spiral.

Unlike here in the US, wage inflation in Asia is a major problem. While the commodity component of July inflation has deflated, the wage component of the Asian equation continues to accelerate. This is a secular “Trend”, not a cyclical one.

Whether or not the Philippines PSE Composite Index has priced in this wage spiral risk is obviously the question from here. Since October 8, 2007, the Philippine stock market has lost -33% of its value (see chart below), and remains comfortably in it’s down “Trend”.

KM
  • PSE Composite Chart - Round Trip!
chart courtesy of stockcharts.com