2019News

Inflation for low-income households eases further in Dec.

By Carmina Angelica V. Olano, January 23 2019; Business World

https://www.bworldonline.com/inflation-for-low-income-households-eases-further-in-dec/

Image Credit to Philippine Star

INFLATION, as experienced by low-income families, further eased in December, driven by a slowdown in price increases in food and utilities, the Philippine Statistics Authority (PSA) said.

The consumer price index (CPI) — a measure of the average rate of change in the retail price of a basket of goods and services — showed inflation for the bottom 30% of households decelerating to 7.2% in December from the revised 8.3% in November, though it was higher than the 3.7% growth recorded in December 2017.

The December result brought the average annual inflation for the bottom 30% to 7.2% in 2018, against 3% in 2017.

The CPI for the bottom 30% income segment reconfigures the model basket of goods, putting a heavier weight on food, beverages, and tobacco (FBT) as well as other necessities as these are thought to more accurately capture the spending patterns of the poor.

Inflation in the heavily-weighted food, beverages and tobacco index decelerated to 8.1% in December from 9.3% in November. Likewise, the food-alone index slowed to 7.1% from 8.3% previously.

The PSA also noted that relative to their annual rates in November, slower upticks were recorded in the following food items: rice (7.8% from 9.7%); corn (1.2% from 3.4%); eggs (3% from 3.1%); fish (10.5% from 11.3%); fruits and vegetables (8.7% from 10.4%); meat (5.6% from 6.2%); and “miscelleneous” foods (5.9% from 6%).

Slowdowns in price growth were also seen in the fuel, light and water index (5.3% from 8.2%); and services (3.6% from 3.7%). On the other hand, stronger price growth was observed in housing and repairs (5.5% from 5.4%), and “miscellaneous” (2.4% from 2.3%) while that of clothing was steady at 3.1%.

Inflation for the bottom 30% segment in the National Capital Region slowed to 4.8% in December from the previous month’s 6.2%. Likewise, those living outside of Metro Manila posted slower inflation at 7.3% from 8.3%.

Sought for comment, Michael L. Ricafort, economist at the Rizal Commercial Banking Corp., noted that even with inflation for the bottom 30% being higher than the headline inflation in December 2018 (at 5.1%), “the easing trend is still a positive signal as this could increase their purchasing power with lower prices of basic commodities especially food and transportation.”

“Higher inflation for the lowest 30% of households in terms of income may reflect the fact that food and other basic commodities such as rice (amid shortage of cheap rice [from the National Food Authority] earlier in 2018) as well as transportation eat up a bigger share of their incomes compared to households with higher incomes (with more muted impact by inflation), thereby reflecting the fact that higher prices of basic commodities have more pronounced adverse impact on their purchasing,” he said.

“Higher prices of cigarettes/tobacco/sin products, sweetened beverages partly on higher excise taxes also have a higher adverse impact on their purchasing power, as expenditure on these account for bigger shares on their incomes, compared to households with higher incomes,” he added. — Carmina Angelica V. Olano

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