Central Luzon’s Inflation and Consumer Price Index (CPI) July 2020

Reference Number: 

2020-SRCPI-Jul2020-072

Release Date: 

Friday, August 28, 2020

Central Luzon’s Inflation Rate Accelerates Further to 3.5%

The annual inflation rate of Central Luzon increased further to 3.5 percent in July 2020 from its posted rate of 2.7 percent in June 2020. It grew by 0.8 percentage points compared to its June 2020 reported rate. Similarly, it is also higher by 0.3 percentage points compared to the posted rate of 3.2 percent in July 2019.  (See Figure 1)

Central Luzon’s annual inflation rate of 3.5 percent ranked the second highest among the 17 regions in the country, next to Bicol region’s inflation rate of 4.2 percent. Davao region registered the lowest inflation rate at 1.2 percent.

The national annual inflation rate also posted an increase from 2.5 percent in June 2020 to 2.7 percent in July 2020.

Figure 2 presents the annual inflation rates of the different regions in the Philippines in July 2020.

The heavily weighted food and non-alcoholic beverages rate of 4.1 percent pushed the general inflation rate to increase at a faster rate in July 2020. In addition, increases in the indices of alcoholic beverages and tobacco (32.1%), housing, water, electricity, gas and other fuels (1.4%), transport (0.4%), communication (0.5%), and restaurant and miscellaneous goods and services (2.8%) were also observed.

Meanwhile, slower decreases were registered in the indices of clothing and footwear at 2.5 percent, furnishings, household equipment and routine maintenance of the house at 2.5 percent, recreation and culture at 0.7 percent and education at 0.2 percent.

Health, on the other hand, retained its July 2020 rate at 2.2 percent. (See Table 1)

Faster rate of increase in the regional food index was registered for the month of July 2020 at 4.2 percent. It was 3.3 percent in June 2020 and 3.1 percent in July 2019. (See Table 1a, p. A-1)

The acceleration in the regional food index was primarily due to faster hikes posted in the following indices:

  • Other cereals, flour, cereal preparation, bread, pasta and other bakery products, 4.2 percent
  • Meat, 9.0 percent
  • Oils and fats, 2.5 percent
  • Fruits, 4.2 percent
  • Sugar jam, honey, chocolate and confectionery, 0.3 percent; and
  • Food products not elsewhere classified, 6.2 percent

Slower mark-ups were posted in the indices of corn at 2.5 percent, fish at 8.2 percent, and milk, cheese and eggs at 5.2 percent. Meanwhile, a faster decline was posted in vegetables at 3.9 percent. The heavily weighted rice, posted a slower increase from its previous month’s rate of -1.6 percent to 0.0 percent in July 2020.

Technical Notes

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 July 2020. 

CPI

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

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

Inflation Rate

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.

 

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