Inflation surged to a nine-year high this month, and the peso slumped to its lowest level against the dollar since 2005 last week.
Finance Secretary Carlos G. Dominguez III said government policy-makers are focusing on the longer-term inflation outlook. “We have to take a long-term view, because if not, every little bump becomes a major crisis.”
In other words, they are saying there is no need to panic, something that is easier said than done for many of our workers whose wages cannot keep up with the fast-rising prices of food and other household expenses.
The administration’s economic managers have already recommended inflation-mitigating measures to President Duterte, who is expected to sign an executive order this month to implement them.
Whether such measures could, indeed, contain inflation and promote price stability, which is essential to bolstering confidence in the economy, is another matter that we will just have to hope for.
An increase in inflation always has a painful effect on lower and fixed income households, those who don’t have any discretionary spending to speak of, and they comprise the majority of the Philippine populace.
According to the Bangko Sentral ng Pilipinas, price stability supports growth because it allows households and businesses to plan ahead and arrive at better-informed decisions concerning their consumption, investment, savings and production needs. Stable prices also allow export firms to price their products competitively, reducing the risks related to increases in the prices of raw materials.
For most Filipinos, though, inflation needs no explanation. We already feel it on a deeply personal level, how inflation has been adding to our expenses and making our purses thinner.
And there is another kind of inflation that does not necessarily involve spikes in the Consumer Price Index, on which the standard measure of inflation is based.
For instance, have you ever gone to your favorite restaurant or fast-food joint, ordered your favorite dish on the menu, and gotten something inferior to what you were used to? Is the portion size less than how you remembered it or are there missing ingredients compared to how it was served before? Does the dish taste less or look starkly different to how it is pictured or advertised?
Have you noticed that your favorite pan de sal has gotten smaller or less filling even if you may still be paying the same amount for each piece?
Are you still paying the same for a packet of instant noodles but each bundle now comes with less grams?
Is there more air now to that bag of chips than before?
Are those snacks and juices coming out in different, supposedly “greener” but subtly smaller, packages?
It’s not just food commodities.
Have you noticed that your home appliances are not lasting longer?
In terms of services, is our money buying less, or are we now paying for services that used to be free?
If we are paying more for goods and services not because of price increases but because we are actually getting lesser quality or smaller portions than usual, then we are victims of this other kind of inflation, called stealth inflation.
Stealth inflation is not indicated through actual price increases but through less discernible cutbacks in the quantity or volume of the commodity, or the quality of service, for which one is paying the same price as before.
If manufacturers and service providers are not resorting to tangible increases in their selling prices, they could very well be resorting instead to content or quality reduction in products and services. There is certainly abundant anecdotal evidence that this kind of short selling is happening.
The same economic managers watching the country’s inflation rate should also make use of government agencies to check the accuracy, quality and consistency of products and services. They should be watchful of stealth inflation or indirect consumer price increases through subtle content reductions, which are not so readily perceptible in their standard computations.
They must make sure Filipinos are getting value for their money, especially since our pesos can only buy so much nowadays.
Image credits: Jimbo Albano