Summary Inflation Report of the Consumer Price Index in La Union: May 2020 (2012=100)

Issue No.: 

2020-15

Release Date: 

Friday, June 26, 2020

The Consumer Price Index (CPI) in La Union in May 2020 was posted at 114.7.This means that on the average, prices of goods and services in the province have increased by 14.7 percent from the base year 2012.  The province’s CPI was recorded at 115.2 in April 2020 and at 112.8 in May 2019. 

Meanwhile, Ilocos Region’s CPI was recorded at 118.7 and 121.3 in May 2019 and May 2020 respectively, higher than La Union’s CPI in said periods.

 

La Union’sinflation rateslows down in May 2020

La Union’s headline inflation decelerated to 1.7 percentin May2020.  Inflation in April 2020 was higher at 2.4 percent and in May 2019 at 2.5 percent.

In 2020, inflation in La Union was posted at 1.4 percent in January.  This rose by 1.5 percent in February and further picked up by 1.8 percent and 2.4 percent in March and April respectively.  Inflation in the province slowed downin May by 1.7 percent.

 

In 2019, the headline inflation in the province was posted at 3.3 percent in January.  Inflation continued to exhibit a slower pace in February, March, and April at 2.9 percent, 2.8 percent, and 2.3 percent respectively.  Inflation accelerated by 2.5 percent in May but slowed down in June at 1.4 percent.   It again rose in July by 1.5 percent but decelerated in August at 0.5 percent.  Meanwhile, negative annual rates were recorded in September, October, and November at -1.5 percent, -1.3 percent, and -0.8 percent respectively.  However, the province’s inflation escalated by 1.0 percent in December. 

 

Meanwhile, Ilocos Region’s headline inflation in May 2020deceleratedto 2.2 percent.  Inflation rate in the regiona month ago was higher at 2.6 percent andin May 2019, at 3.7 percent.

 

The downtrend in inflation in the province in May 2020 was primarily brought about by the slower annual rate posted in the heavily-weighted food and non-alcoholic beverages index at 4.7 percent from 6.4 percent in April 2020.  In addition, slower annual increments were noted in the indices of transport at -8.5 percent from -8.1 percent and housing, water, electricity, gas and other fuels at -3.7 percent from -3.4 percent. 

On the other hand, the annual gains in the indices of furnishings, household equipment and routine maintenance of the house accelerated by 2.7 percent and health by 0.4 percent from their respective previous month’s annual rates of 2.2 percent and 0.2 percent.  The rest of the commodity groups retained their previous month’s annual rates. 

The annual mark-up in the food alone index eased to 4.9 percent in May 2020 from 6.7 percent a month ago.  Compared with their annual rates in April 2020, lower annual increases were also observed in the indices of the following food groups in May 2020:  bread and cereals (-1.0% to -1.3%);rice (-1.9% to -2.3%); fish (22.5% to 17.9%); fruits (9.2% to 7.7%); vegetables (15.7% to 2.4%); and food products not elsewhere classified (12.8% to 11.9%). 

On the contrary, a higher annual uptick of 7.0 percent was registered in the milk, cheese and eggs indexduring the month than last month’s annual increment of 6.6 percent.  The annual hike in the meat index also accelerated by 6.8 percent from 6.0 percent while the annual changes in the oils and fats index rose by 3.2 percent from 3.1 percent.  

The rest of the food groups retained their previous month’s annual growth rates:  other cereals, flour, cereal preparation, bread, pasta and other bakery products (1.9%); and sugar, jam, honey, chocolate and confectionery (1.2%).

 

PPP in La Union remains at PhP0.87 in May 2020

The Purchasing Power of the Peso (PPP) in La Union stood at PhP0.87 in May 2020, the same figure as of last month. This means that the purchasing capability of PhP1.00 in 2012 decreased by 13 centavos in May 2020. La Union’s PPP was recorded at PhP0.89 in the same month a year ago.

 

In2019, the PPP in La Union was recorded at PhP0.89 in May and remained in June.  It decreased by PhP0.88 in July and was the sameuntil August.  It went up to PhP0.89 in September but again decreased to PhP0.88 in October and recorded the same figure until December.

In 2020, the PPP in the province was stable at PhP0.87 from January to May. 

La Union’s PPP in May 2020 was higher than Ilocos Region’s PPP of PhP0.82.  The region’s PPP was posted at PhP0.82 in April 2020 and at PhP0.84 in May 2019.

 

TECHNICAL NOTES

The Philippine Statistics Authority (PSA) generates and announces the monthly Consumer Price Index (CPI) based on a nationwide survey of prices for a given basket of goods and services. 

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 relative to a base year.  It shows how much on the average, prices of goods and services have increased or decreased from a particular reference period known as base year.  It also serves as a basis for economic analysis, collective bargaining agreements, for wage adjustments, and for monitoring the effects of government economic policy on households. 

 

Rebasing of CPI to Base Year 2012 and Adopting the Chain Method in the 2012-based CPI

The PSA released the CPI for All Income Households with base year 2012 on 06 March 2018.  The 2012-based CPI is the tenth in the rebasing series.  This was announced in Press Release Number 2018-031 dated 22 February 2018.  Two sets of the CPI, 2006-based and 2012-based series were issued simultaneously until June 2018.  The CPI series for July 2018 onwards shall be 2012-based.

 

 

  1.  Identification of the Base Year

The base period is the period, usually a year, at which the index number is set to 100.  It is the reference point of the index number series. The CPI is now rebased to 2012 base year from the current 2006 base year. 

The year 2012 was chosen as the next base year because it was the latest year when the Family Income and Expenditure Survey (FIES) results were made available.  It is also in accordance with PSA Board Resolution No. 1, Series of 2017-146, which approved the synchronized rebasing of the price indices to base year 2006 and every six (6) years thereafter. 

 

  1. Determination of the Market Basket

Market basket refers to a sample of goods and services, which is meant to represent the totality of all goods and services purchased by households relative to a base year. 

Determining the right market basket is crucial because inadequate representation of the typical basket will give wrong signals as to the behavior of prices, a very important factor in economic planning. 

To determine the commodities that will form the market basket for the 2012-based CPI, the updating of the 2006 basket through the Survey of Key Informants was conducted from 07 October to 15 November 2013.  The survey was conducted nationwide to store managers, sellers or proprietors and were asked of the most commonly purchased items or commodities.  The commodities are grouped according to the 2010 Philippine Classification of Individual Consumption According to Purpose (COICOP) which is based on the United Nations COICOP. 

 

  1. Determination of the Household Consumption Patterns (Weights)

This activity involves assigning weights to the commodity groups/sub-groups.  This reflects the consumption priorities of households and the way they allocate resources to meet their needs.  Weight is a value attached to a commodity or group of commodities to indicate the relative importance of that commodity or group of commodities in the market basket. 

The weights for the 2012-based CPI were derived from the expenditure data of the 2012 FIES, a survey that covered around 50,000 sample households nationwide.  The weight for each item of expenditure is a proportion of that expenditure item to the total national expenditure.  The total (all items) national expenditure weights is equal to 100. 

The 2012 FIES expenditure data were used to directly estimate the 2012 CPI weights at the national and regional levels.  However, the 2012 FIES estimates for the expenditure data at the provincial level were not directly utilized in estimating the CPI expenditure weights as the data at the provincial/city level may not be reliable with the use of the households’ master sample (MS) that was utilized in selecting the 2012 FIES sample households.  The MS was drawn using regions as domains in generating estimates in all the household surveys of the PSA starting July 2003. 

The provincial/city expenditure data were derived using the model-based method in small area estimation procedures using the regional expenditure data as the control total for all the expenditure data within the specific region.  Using these estimates, the weight for each item of expenditure is computed as a proportion of that item of expenditure to the total national expenditure.  A raking procedure was done to adjust the weights of the provinces so that the provincial weights when added up will equal to the regional weights. 

 

  1. Monitoring of Prices of Items in the Market Basket

This involves establishing baseline information for prices of the items in the base year and monitoring the prices of the items on a regular basis.  Collection of data for the CPI is done by the provincial staff of the PSA.  Except for food, beverage and tobacco (FBT) in the National Capital Region(NCR) and petroleum products which are monitored on a weekly basis, price collection is generally done twice a month.  First collection phase is done in the first five days of the month while the second phase is on the 15th to 17th day of the month.  Data are collected from the sample outlets (outlets or establishments where prices of commodities/services are collected or quoted) which were chosen using the following criteria:

  1. Popularity of an establishment along the line of goods to be priced – this means the sample outlet is publicly noted in the locality for selling goods included in the CPI market basket and the outlet is patronized by a large segment of the population. 
  2. Consistency and completeness of stock

        Consistency of stock – the outlet has a constant, steady or regular stock of commodities listed in the CPI price collection forms as well as of those commodities of the same kind and belonging to the same commodity group.

        Completeness of stock – the sample outlet carries in its stock many if not all of the items included in the CPI price collection forms relative to the other outlets in the area. 

  1.  Permanency of outlet – the outlet is an established store or stall in the market area.  It should not be an ambulant or transient vendor in order that the collection of data can be done for the succeeding survey rounds. 
  2. Geographical location – the outlet is conveniently located and is accessible to the majority of consumers in the area. 

 

  1.  Computation of the CPI

The PSA employed the weighted arithmetic mean of price relatives and the “Chain” method to provide timely indicators since this method allows the inclusion or exclusion of commodities in the market basket to address the changing consumer taste and preferences and technological changes. Below are the steps in the computation of CPI using the 2012 as the base year:

 

Economic Indicators Derived from the CPI

Two important indicators, the inflation rate and PPP, are derived from the CPI which are important in monitoring price stability and the value of the country’s currency.

Inflation Rate is the annual rate of change or the year-on-year change of the CPI expressed in percent. The formula is:

Headline Inflation is the rate of change in the weighted average prices of all goods and services in the CPI basket while Core Inflation refers to the rate of change in the CPI that excludes the following item/commodity groups: rice, corn, fruits and vegetables, and fuel items.

The PPP measures the real value of the peso in a given period relative to a chosen reference period. It is computed by getting the reciprocal of the CPI and multiplying the result by 100.

 

 

 

SGD. DANITES E. TEÑIDO, Ph.D.

Chief Statistical Specialist

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La Union