Central Luzon’s Inflation Rate Slowed Down to 2.6%
The annual inflation rate of Central Luzon dropped to 2.6 percent in August 2020 from its posted rate of 3.5 percent in July 2020. It decreased by 0.9 percentage points compared to its July 2020 reported rate. Further, it is also lower by 0.2 percentage points compared to the posted rate of 2.8 percent in August 2019. (See Figure 1)
Central Luzon’s annual inflation rate of 2.6 percent ranked the seventh highest among the 17 regions in the country. Bicol region remained with the highest inflation rate at 4.0 percent likewise, Davao region retained its rank as the lowest registered inflation rate at 0.2 percent.
The national annual inflation rate also posted a decrease from 2.7 percent in July 2020 to 2.4 percent in August 2020.
Figure 2 presents the annual inflation rates of the different regions in the Philippines in August 2020.
The general inflation rate of the region was primarily pulled down by the heavily weighted food and non-alcoholic beverages with the registered rate of 3.1 percent in August 2020. Moreover, decreases in the indices of alcoholic beverages and tobacco (23.8%), clothing and footwear (1.7%), housing, water, electricity, gas and other fuels (0.3%), furnishings, household equipment and routine maintenance of the house (1.9%), health (1.8%), transport (0.2%) and restaurant and miscellaneous goods and services (2.3%) were observed.
A decline of 1.1 percent in the index of recreation and culture further adds up to the slowdown in the general inflation rate of the region in August 2020.
Meanwhile, the indices of communication and education retained their previous month’s rates for the month of August 2020 at 0.5 percent and 0.2 percent, respectively. (See Table 1)
The regional food index registered a slowdown for the month of August 2020 at 3.3 percent. It was 4.2 percent in July 2020 and 0.9 percent in August 2019. (See Table 1a, p. A-1)
Slower rate of increase in the following indices was the primary reason for the deceleration in the regional food index:
• Other cereals, flour, cereal preparation, bread, pasta and other bakery products,
• Meat, 7.0 percent
• Fish, 7.1 percent
• Milk, cheese and eggs, 3.7 percent
• Fruits, 1.1 percent; and
• Food products not elsewhere classified, 5.8 percent
Faster rate of declines in the indices of vegetables at -4.0 percent and sugar, jam, honey, chocolate and confectionery at -0.2 percent also pulled the general food index down. Meanwhile, increase in the indices of rice (0.2%), corn (3.3%) and oils and fats (2.6%) were not enough to push up the general food index in August 2020.
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.