Rising inflation this year has been the nemesis of Filipino consumers. Spending habits can drastically change when prices of certain goods or services spike at a short notice.
The ordinary Filipino consumer amid a high inflation period will spend less on non-essential items. He reallocates his household budget for more priority items like rent, in the case of those who do not own a house yet, rice and food, transportation and school fees. He may also buy cheaper alternative items for the meantime.
Inflation, to me, is a critical barometer of the economy. Higher prices eat into the monthly wage of employees and return on investments, in the case of small entrepreneurs and big businesses as well. The reduced purchasing power of consumers seeps into the overall economy—lower consumer spending leads to reduced factory production and eventually lower employment.
Revenge spending following the easing of Covid-19 restrictions partly led to higher prices in the Philippines and the rest of the world. Supply constraints added to the inflationary pressure, as producers were not quick enough to adjust to the increased demand. Russia’s invasion of Ukraine resulted in higher crude and gas prices, as the two warring nations are major energy producers.
Central banks around the world, thus, moved in to strike a balance between economic growth and overheating prices to protect the purchasing power of consumers. They increased lending rates in an effort to slow down spending further and rising inflation rate.
Easing supply constraints and reduced spending from consumers, meanwhile, have now trimmed the inflationary pressures. Ample rice harvests in October and November contributed to the overall lower prices.
The lower inflation rate registered in the months of October and November this year is a welcome respite. Our consumers need not worry further as food prices are going down. The declining trend in prices gives consumers the confidence to increase their spending budget on non-food items, especially this holiday season.
The inflation rate in November retreated to a 20-month low of 4.1 percent from 4.9 percent in October on slower increases in the prices of food and non-alcoholic beverages. Per the data from the Philippine Statistics Authority, November prices were the slowest since the inflation rate went down to 4 percent in March 2022.
The food inflation decreased to 5.8 percent in November from 7.1 percent in October. The PSA data showed a deflation in vegetables (-2.0 percent from 11.9 percent) because of favorable weather, and lower inflation of fish (4.9 percent from 5.6 percent), meat (0.5 percent from 0.8 percent), sugar (1.5 percent from 4.9 percent), bread and other cereals (6.9 percent from 7.4 percent) and fruits (13.1 percent from 13.5 percent).
The same PSA data showed that non-food inflation also declined to 2.9 percent from 3.4 percent in October. The agency noted a deflation in transportation (-0.8 percent from 1.0 percent) and slower inflation in restaurant and accommodation services (5.6 percent from 6.3 percent).
The lower inflation rates in the past two months are an indication that our Filipino consumers will boost their spending budget toward the end of the year. Reduced prices give them confidence to buy more goods and services and not worry about their lower purchasing power.
Another piece of good news
Reading the latest data on the unemployment rate gives me further confidence that we will have a solid economic growth in the last quarter of 2023.
The nation’s unemployment rate dropped to its lowest level in nearly two decades in October to 4.2 percent from 4.5 percent in the same month last year. It is the lowest unemployment rate since April 2005, per the statement of the PSA.
About 2.09 million Filipinos were unemployed in October, down from 2.24 million recorded a year ago. The same labor force survey showed a positive employment rate of 95.8 percent, exceeding the 95.5 percent recorded in October 2022 and marking the highest level since April 2005.
In absolute terms, about 47.80 million aged 15 and above were employed as of October this year, up from 47.06 million in the same period last year.
More Filipinos joining the labor force mean higher consumer spending. This, in turn, will translate into increased factory production and services. We have a vibrant Philippine economy, aided by a decreasing inflation rate. The Philippines is about to receive more blessings this Christmas season.