Year-on-Year Price Index Situation for the month of August 2020
The annual inflation rate for bottom 30% income households in Central Luzon recorded a 0.3 percentage points decreased from 3.6 percent in July 2020 to 3.3 percent in August 2020. Among regions in the country with the highest inflation rate, Central Luzon ranked fifth. Central Visayas remained with the highest inflation rate at 4.1 percent. While, Zamboanga Peninsula, had the lowest inflation rate at 0.4 percent. The national inflation rate for the bottom 30 percent income households also decreased from 2.9 percent in July 2020 to 2.7 percent in August 2020.
Decrease in the annual inflation rate of Alcoholic Beverages and Tobacco at 17.3 percent and the -2.6 percent decline in Recreation and Culture pulled down the region’s inflation rate to 3.3 percent in August 2020. Slower decreased were also recorded in the following indices:
- Food and Non-Alcoholic beverages, 2.6 percent
- Clothing and Footwear, 1.3 percent
- Education, 0.3%
On the other hand, increased in the indices of Health at 2.3 percent, Transport at 5.1 percent and Restaurant and Miscellaneous Goods and Service at 2.8 percent were recorded in August 2020.
While indices of Housing, Water, Electricity, Gas and Other Fuels (1.8%), Furnishing, Household Equipment and Routine Maintenance (1.3%) and Communication (0.4%) retained their July 2020 inflation rates. (See Table A)
Central Luzon’s year-on-year inflation rate for the bottom 30 percent income households registered a decrease from 3.6 percent in July 2020 to 3.3 percent in August 2020. (See Figure 2)
Decreased in the indices of Fish and Food Products N. E. C. were recorded at 8.0 percent and 3.7 percent respectively. Slower decreased were also observed in the following indices:
- Other Cereals, Flour, Cereal Preparation, Bread, Pasta and Other Bakery Products, 2.7%
- Meat, 5.0 %
- Milk, Cheese and Eggs, 6.2%
- Fruits, 6.3%
Faster deceleration in the heavily weighted food index of Rice was recorded at -0.5 percent. In addition, slower decline in the indices of Vegetables (-1.5%) and Sugar, Jam, Honey, Chocolate and Confectionery (-0.1%) were also observed.
On the other hand, an increased in the index of Oils and Fats at 2.2 percent was recorded in August 2020. Index on Corn remained unchanged at 1.7 percent. (See Table B)
EDGARDO G. PARE
Regional Director, RSSO III
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 August 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 2012 as the base year. The year 2012 was chosen as the base year because it is the year when the Family Income and Expenditure Survey (FIES) was conducted. The FIES is the basis of the CPI weights.
- 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.
- Classification Standards
The 2012-based CPI series is the first in the series that used the 1999 United Nations Classification of the Individual Consumption According to Purpose (COICOP) in determining the commodity groupings of the items and services included in the market basket. The 2012-based CPI also follows the 2015 Philippine Standard Geographic Classification codes.
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.