Inflation’s impact on low-income households eases further in October, slowest in 4 years

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INFLATION, as experienced by low-income families, eased to its slowest pace in four years in October, the Philippine Statistics Authority reported on Thursday.

The inflation rate for the country’s bottom 30% income households clocked in at 0.8% in October, slower than the year-on-year overall increases of 0.9% in September and 9.5% in October 2018.

The latest reading for the bottom 30% inflation marked the slowest clip in four years or since October 2015’s 0.4%.

Year to date, the inflation for this income segment averaged 3.6%, slower than the seven-percent average in 2018’s comparable months last year.

This compares with the 0.8% headline inflation experienced by the average Filipino household in October that was slower than September’s 0.9% and 6.7% in October 2018.

The PSA uses the 2012 base year in computing the headline consumer price index (CPI), while the bottom 30% income households’ CPI uses 2000 prices.

Moreover, the CPI for the bottom 30% income segment of the population reconfigures the model basket of goods in order to make it more representative of the consumption patterns of the poor. For instance, food accounts for 75% of the theoretical basket of goods used by a poor household compared to an average household’s 35.5%.

Inflation in the food, beverages and tobacco index was 0.6% in October, lower than the 0.7% in September. Inflation likewise cooled in services at 2.8% from three percent the previous month.

Meanwhile, inflation steadied in clothing (2.8%), housing and repairs (3.5%), and miscellaneous items (2.2%).

On the other hand, the fuel, light and water index declined 0.7%, compared to September’s year-on-year 0.4% contraction. The food-alone index also declined 0.6% from 0.3% contraction previously.

“It looks like this particular CPI data has been tracking the headline number. The big mover in this economic segment is basically the food and non-alcoholic beverages index, parallel to the national CPI,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail. “Rice prices and other food items are critical to the movement of this specific population segment and has basically caused the continuing decline.”

For University of Asia and the Pacific Associate Professor Peter Lee U, easing food prices would explain the inflation downtrend for the bottom 30% income segment. “Partly, it may be that the decline is because we are coming from a high base. TRAIN may have pushed prices higher last year, so that this year’s prices look low by comparison,” Mr. U said, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which slashed personal income tax rates but also introduced additional levies on consumer goods such as fuel, cars and sugar-sweetened drinks.

To recall, inflation for the bottom 30% averaged 7.2% in 2018, reaching as high as 9.5% in September and October last year.

For UnionBank’s Mr. Asuncion, inflation for that income segment can be “expected to have slightly higher annual percentage increases” in the coming months due to “seasonal factors” as well as the impact of the African Swine Fever on pork and alternative meat. — Genshen L. Espedido

Inflation for low-income households eases further in October (2019)