By Mark T. Amoguis
INFLATION for low-income families softened further in February even as it stayed in five-percent territory, the Philippine Statistics Authority (PSA) reported on Thursday.
The inflation rate for the country’s bottom 30% income households clocked in at five percent in February, slower than the year-on-year price increases of 5.9% in January and 5.4% in February 2018.
That compared to a 3.8% headline inflation experienced nationwide by the average household in February, even as the consumer price index (CPI) used in measuring headline inflation has 2012 as the base year while the CPI for the bottom 30% income households uses 2000 prices.
The CPI for the bottom 30% income segment of the population has heavier weighting for the food, beverages and tobacco subindex in order to more accurately represent the spending patterns of the poor.
That subindex rose 5.6% year on year compared to 6.7% in January. Similarly, the food-alone index grew by five percent in February versus the previous month’s 5.8%.
Slower annual gains were observed in all food groups that month, the PSA said. For instance, rice saw a 5.6% year on year inflation rate in February, easing from the 6.8% logged in January. Price of corn, meanwhile, dropped further by 2.3% in February from -0.7% the preceding month.
The cost of utilities — consisting of fuel, light and water — decelerated to 2.7% from January’s 3.4%. Slower increases were also recorded in clothing at 2.9% from 3.1%, and housing and repairs at 4.3% from 4.6%. The annual rates of services and miscellaneous items steadied at 3.5% and 2.4%, respectively.
Inflation experienced by poor households in the National Capital Region was recorded at 2.9%, slower than the 4% recorded in January. Those living outside of Metro Manila saw a slower inflation rate of five percent from 5.9%.
All the regions posted slower annual inflation, except in the Autonomous Region in Muslim Mindanao, which had a higher annual rate of 2.8% in February from 2.7% in January. Northern Mindanao posted the lowest inflation rate at 2.1% while the highest annual rate was seen in the MIMAROPA Region (consisting of Occidental Mindoro, Oriental Mindoro, Marinduque, Romblon and Palawan south of Metro Manila) at 11.4%.
“The decline in global oil prices and the normalization of domestic supply chains of basic goods and services have largely contributed to the slowdown in the increase of price levels of goods and services used by low-income families. Note that this decline also dampens the negative impact of high inflation on the bottom 30% of households in the country,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), said in an e-mailed reply to questions.
In a separate e-mail, Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said the easing of inflation for the poor reflected the slowdown in headline inflation as the basket of goods for these households are “skewed to an even heavier weight” for necessities such as food.
“With supply chains normalizing and bottlenecks mitigated, we’ve seen how quickly prices have come down, just as the case in most cost-push or supply-driven inflation,” Mr. Mapa said.
Economists expect the downward trend to continue for the rest of the year.
“With inflation expected to glide into the government’s target of 2-4% within 2019, UnionBank’s Economic Research Unit anticipates inflation for the poor to continue to slow down and probably come back to pre-2018 levels,” UnionBank’s Mr. Asuncion said.
ING’s Mr. Mapa gave a similar assessment. “We can expect the deceleration in prices for both [the headline] and the lower 30% of households [to] continue to slide, with base effects kicking in and now that the rice tariffication law is in effect,” he said, referring to the new law that replaces the quantitative restriction on rice imports with tariffs in hopes of slashing the retail price of the staple by up to P7 per kilogram and headline inflation by up to 0.8 percentage point.
Inflation as experienced by low-income households (bottom 30%)