Year-on-Year Price Index Situation for the month of February 2021Central Luzon’s annual inflation rate for bottom 30 percent income households slightly decreased from 7.2 percent in January 2021 to 6.9 percent in February 2021. On the contrary, it recorded a 4.3 percentage point increase from February 2020 inflation rate of 2.6 percent. (See Figure 1)
Central Luzon has remained the 3rd highest inflation rate among the 17 regions in the country at 6.9 percent. Cagayan Valley continued to have the highest inflation rate at 8.6 percent, while Zamboanga Peninsula remained with the lowest inflation rate at 0.6 percent. In February 2021, a 0.6 percentage point increase in the national inflation rate for the bottom 30 percent income household was recorded from 4.9 percent in January 2021 to 5.5 percent in February 2021.
Year-on-Year Price Change by Commodity Group
Decrease in the annual rates on the heavily weighted Food and Non-Alcoholic Beverages and Housing, Water, Electricity, Gas and Other Fuels at 8.6 percent and 0.1 percent pulled down the region’s inflation rate to 6.9 percent. Furthermore, a slower decline in the index on Recreation and Culture was observed at -1.8 percent.
On the other hand, an increase in the indices on Alcoholic Beverages and Tobacco and Transport was recorded at 11.9 percent and 17.4 percent, respectively. In addition, slower increases in the following indices were recorded in February 2021:
· Clothing and Footwear, 2.2 percent;
· Furnishing, Household Equipment and Routine Maintenance, 1.7 percent;
· Health, 2.5 percent;
· Education, 0.1 percent; and
· Restaurant and Miscellaneous Goods and Service, 5.3 percent.
Communication maintained its annual inflation rate at 1.0 percent.
Year-on-Year Price Change by Food Group
Faster rate of increase in the indices of Meat and Oils and Fats were recorded at 25.9 percent and 3.5 percent, respectively. Moreover, slower increases were also observed in the following indices:
· Other Cereals, Flour, Cereal Preparation, Bread, Pasta and Other Bakery Products, 2.4 percent;
· Fish, 7.5 percent;
· Fruits, 14.4 percent; and
· Food Products, N.E.C., 10.4 percent.
On the other hand, decreases in the indices of Rice (0.8%), Milk, Cheese and Eggs (2.0%), Vegetables (30.1%) and Sugar, Jam, Honey, Chocolate and Confectionery (0.1%) were recorded in February 2021. In addition, a slower decline was observed in the index of Corn at -0.9 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 February 2021.
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
a. 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.
b. 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.
c. 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.
d. 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.
e. 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.