Year-on-Year Price Index Situation for the month of April 2020
The year-on-year inflation rate for bottom 30% income household in Central Luzon was posted at 4.4 percent in April 2020 with 0.7 percent increase from last month’s 3.7 percent. Central Luzon ranked 3rd highest among the 17 regions in the country. The lowest inflation rate was still recorded in Cordillera Administrative Region at 0.4 percent while BARMM remained to have the highest inflation rate at 5.3 percent. The national inflation rate for the bottom 30 percent income household also increased from 2.6 percent in March 2020 to 3.2 percent in April 2020
The uptrend in the region’s inflation rate was brought about by the increase on Food, Beverage and Tobacco from 4.5 percent to 6.2 percent. On the other hand, decreases in Fuel, Light and water at -0.7 percent and Services at 1.2 percent were recorded in April 2020. Clothing, Housing and Repairs and Miscellaneous retained its previous month’s annual rate of 1.6, 2.5 and 2.0 percent respectively. (See Table A)
Central Luzon’s year-on-year inflation rate for the bottom 30 percent income households registered an increase from 3.7 percent in March 2020 to 4.4 percent in April 2020. (See Figure 2)
Faster increases in the indices of food were observed in April 2020 at 4.8 percent. This acceleration was supported by the increase in Fruits and Vegetables at 16.2 percent and Miscellaneous Foods at 5.5 percent. Slower increases were also noted in the following indices:
- Cereals, 1.0%
- Rice, 0.9%
- Cereal Preparations, 2.0%
- Eggs, 14.7%
- Meat, -1.2%
On the other hand, slower decreases were recorded in the indices for Corn at 9.6 percent, Dairy products at 1.2 percent and Fish at 9.2 percent. (See Table B)
This Special Release presents the results of the Survey of Retail Prices of Commodities and Services for the Generation of Consumer Price Index (CPI) conducted in April 2020.
The CPI is an indicator of the change in the average retail prices of a fixed basket of goods and services commonly purchased by households for their day-to-day consumption relative to a base year.
Uses of the CPI
As an indicator, the CPI is most widely used in the calculation of the inflation rate and purchasing power of the peso. It is a major statistical series used for economic analysis and as monitoring indicator of government economic policy.
The CPI is also used as a deflator to express value series in real terms, which is, measuring the change in actual volume of transaction by removing the effects of price changes. Another major importance of the CPI is its use as basis to adjust wages in labor management contracts as well as pensions and retirement benefits. The CPI also serves as inputs in wage adjustments through the collective bargaining agreements.
Components of the CPI
- Base Period
This is a reference date or simply a convenient benchmark to which a continuous series of index numbers can be related. Since the CPI measures the average changes in the retail prices of a fixed basket of goods, it is necessary to compare the movement in previous years back to a reference date at which the index is taken as equal to 100. The present series uses the 2000 as the base year.
- Market Basket
Market basket refers to a sample of thousands of varieties of goods purchased for consumption and services availed by the households in the country. It was selected to represent the composite price behaviour of all goods and services purchased by the consumers.
- Weighting System
The weighting system is a desirable system that considers the relevance of the components of the index. For the CPI, the weighting pattern uses the expenditures on various consumer items purchased by households as a proportion to total expenditures.
- Geographic Coverage
CPI values are computed at the national, regional, and provincial levels, and for selected cities. A separate CPI for NCR is also computed.
The inflation rate (IR) is the annual or monthly rate of change of the CPI in percent. It is interpreted in terms of declining purchasing power of money.
The 2000-based Consumer Price Index (CPI) for Bottom 30% Income Households in the Philippines
The monthly computation of the CPI for bottom 30% Income Households was started only in July 2018.
The National Statistical Coordination Board (NSCB) approved the methodology for the computation of the CPI for the bottom 30% income group households on March 11, 2009 (NSCB Resolution No.5, Series of 2009 “Approving the Estimation Methodology for the Consumer Price Index for the Bottom 30 Percent Income Group Households”).
The NSO officially released the CPI for bottom 30% using 2000 as the base year on May 19, 2011.
Features of the 2000-based CPI for bottom 30% per capita income group:
The estimated weights were based from the results of the 2000 Family Income and Expenditure Survey (FIES) for bottom 30% income households.
- Market basket
The market basket used in the construction for the 2000-based bottom 30% CPI series is the result of the updating of the 1994 market basket. The bottom 30% market basket is a subset of the 2000-based all income market basket. The number of items in the bottom 30% income market basket ranged from 224 in Batanes to 725 in Negros Occidental. NCR has 476 items in its market basket.
- Laspeyre’s Formula was used in computing the index.