DUE to high inflation, Filipinos need to shell out an additional P17 today for every P100 they used to spend buying various goods and services six years ago, according to the Philippine Statistics Authority (PSA).
Data showed inflation reached 6.7 percent in October 2018, higher than the 3.1 percent posted in October 2017 and the same rate posted in September 2018. Month-on-month inflation was flat at 0.3 percent in October, slower than the 0.8 percent posted in September.
This also means that the Filipino’s P10,000 in 2012 is now only worth P8,300 due to the rise in inflation. This means the value lost due to high prices is P1,700 in six years.
“You need an additional P17 to buy the same goods and services [you bought in 2012 with your P100],” PSA Price Statistics Division Chief Statistical Specialist Elena G. Varona told the BusinessMirror on the sidelines of the agency’s press briefing on inflation
The PSA explained that the Consumer Price Index “is an indicator of the change in the average retail prices of a fixed basket of goods and services commonly purchased by households relative to a base year.” In October the CPI is 119.8, since the base year used is 2012. Using a base year of 2012 means the CPI for all items is at 100.
Wage, fare hikes
Meanwhile, economists estimate that the increase in commodity prices may continue in the last two months of the year on the back of the wage and transport-fare hikes.
Emilio S. Neri Jr., lead economist of the Bank of the Philippine Islands, said the recent transport fare and wage hikes will cause a second round of commodity price increases in the last quarter of the year.
These price hikes, as well as the impact of Typhoon Rosita, have not been factored into in the computation of the PSA. Only the impact of Typhoon Ompong was inputed in the inflation estimates of October 2018.
“The 6.7-percent October inflation means the fourth quarter, not the third quarter, is the likely peak for quarterly inflation in 2018, as both November and December are likely to remain above 6 percent,” Neri said.
“[However], we agree that nonmonetary measures are gaining traction, but BSP [Bangko Sentral ng Pilipinas]needs to be vigilant against additional second-round inflation risks, including the impact of the recent transport fare and wage hikes,” he added.
Neri said the Monetary Board should also raise interest rates in their meeting in November 15 to keep inflation in check, given the possible increase in prices due to the recent fare and wage hikes. He said full-year inflation could likely average 5.3 percent and high inflation could continue until the first half of 2019.
“Additional policy tightening will be necessary to keep inflationary expectations well anchored, as the 4-percent inflation target will remain elusive until around the middle of 2019,” Neri said.
Unionbank Chief Economist Ruben Carlo Asuncion said while headline inflation was at 6.7 percent, the same rate posted in October 2017, core inflation was at 4.9 percent. This was higher than the 4.7- percent core inflation rate in September 2018 and 2.6 percent in October 2017.
The PSA explained that core inflation measures the change in average consumer prices after excluding from the CPI certain items with volatile price movements. It is often used as an indicator of long-term inflation trends and future inflation. “It’s interesting how October 2018 core inflation is higher at 4.9 percent. This is indicative that headline inflation may still actually trend upward,” Asuncion said.
Nonetheless, Asuncion said headline inflation rate in Metro Manila or the National Capital Region has eased while inflation in Areas Outside NCR has remained the same.
He said this could indicate that inflation has already peaked. Asuncion noted there has been a slowdown in food and nonalcoholic beverages index, which was considered the biggest factor driving high inflation.
PSA data showed year-on-year inflation in food and nonalcoholic beverages slowed to 9.4 in October 2018, from 9.7 percent in September 2018. There was also a slowdown in the inflation of alcoholic beverages and tobacco to 21.6 percent in October 2018, from 21.8 percent in September 2018.
However, data showed that rice inflation continued to increase and reached 10.7 percent in October 2018, from 10.4 percent in September 2018. Fish prices also increased, and inflation reached 13.8 percent in October 2018, from 13.4 percent in September 2018.
He said full-year inflation may average 5.4 percent because he estimates that inflation will remain high in the last two months of the year but will not rise further.
“Although there has been a slight easing, inflation may remain elevated because of second-round effects coming from recent transport fare and wage hikes,” Asuncion said.
However, University of Asia and the Pacific School of Economics Dean Cid Terosa and Senior Economist Victor A. Abola believe the worst may be over with regard to high commodity prices.
Terosa said this may be largely due to the slowdown in food and petroleum prices. The lower prices of these commodities can easily offset any impact that the recent transportation and wage hike will have on prices.
With inflation peaking in October, Terosa estimates that full-year inflation will range anywhere from 5.1 percent to 5.3 percent this year. Abola, for his part, agreed that inflation has already peaked even if the full impact of food/rice price and oil price movements have not been completely reflected.
It may be noted that the national government imposed suggested retail prices toward the end of October. This adjustment is expected to be reflected in the coming months.
“A bigger slowdown will, thus, ensue in November. I expect inflation then to be just 6.2 percent in November,” Abola said. “Crude oil prices abroad have dropped by some 15 percent from their highs in early-October. Rice prices will go down significantly only with the release of more imported rice,” he added.