La Union’s CPI increased to 114.9 in 2^nd Quarter 2020

The average Consumer Price Index (CPI) in La Union during the second quarter of 2020 was recorded at 114.9.  Said figure was 2.3 percentage points higher than the average CPI during the same period of 2019 of 112.6 and 0.3 percentage point higher than the past quarter CPI of 114.6.

The province’s average CPI during the second quarter of 2019 and 2020 were lower than Ilocos Region CPI which were posted at 118.5 and 121.4 respectively.

Figure 1 shows the trend of La Union’s CPI by month during the secondquarter of 2019 and 2020. During the second quarter of 2020, a downtrend was noted in the CPI ofthe province from April to May at 115.2 while the CPI in the province remained in June at 114.7.

In the same period a year ago, La Union's CPI was recorded at 112.5 in April. It slightly increased to 112.8 in May but decreased in June at 112.6.

La Union’s average CPI of 114.6 during the first quarter of 2020 means that on the average, prices of goods and services have increased by 14.6 percent from 2012.  This also means that a basket of commodities worth PhP 100.00 in 2012 is worth PhP 114.90 in the second quarter of 2020.

La Union’s inflation increased by 2.0 percent in 2^nd Quarter2020

La Union’s average year-on-year headline inflation increased by 2.0 percent in the second quarter of 2020from a quarter-ago average of 1.6 percent using the 2012-based CPI series. Said figure is 0.1 percentage point lower than the recorded figure in the second quarter of 2019 of 2.1 percent.

Meanwhile, Ilocos Region’s average headline inflation slowed down to 2.4 percent in the second quarter of 2020 from 2.6 percent in the previous quarter.  Said figure was lower by 0.9percentage point than the average inflation of the region in the second quarter of 2019 posted at 3.3 percent.

Alcoholic beverages and tobacco index exhibits the highest inflation in 2^nd Quarter2020

The commodity group alcoholic beverages and tobacco index recorded the highest average inflation rate at 17.3 percent in the second quarter of 2020.  The next highest average inflation was registered in the index of food and non-alcoholic beverages  at5.0 percent, followed by restaurant and miscellaneous goods and services (3.5%);clothing and footwear (3.3%);and furnishings, household equipment and routine maintenance of the house (2.6%).  Health, communication, recreation and culture and educationcommodity groups posted indices of 1.0 percent and lower.

On the other hand,negative inflation rates were recorded in the indices oftransport and housing, water, electricity, gas and other fuels transport and housing, water, electricity, gas and other fuels (-3.5%).

Figure 4 shows the comparison of the inflation rates in La Union from April to June of 2019 and 2020.  During the second quarter of 2020, the headline inflation rate in the province was posted at 2.4 percent in April. It slowed down to 1.7 percent in May but accelerated by 1.9 percent in June.

In the same period a year ago, inflation was posted at 2.3 percent in April and rose by 2.5 percent in May. Inflation in the province eased by 1.4 percent in June.

PPP in La Union remains stable at PhP0.87 in 2^nd Quarter 2020

The average Purchasing Power of the Peso (PPP) in La Union remained stable at PhP0.87 during the second quarter of 2020.  This means that the purchasing capability of PhP1.00 in 2012 decreased by 13 centavos in the second quarter of 2020.  La Union’s average PPP was recorded at PhP0.87 a quarter ago and at PhP 0.89 in the second quarter of 2019.

La Union’s average PPP in the second quarter of 2020 was higher than IlocosRegion’s average PPP of PhP0.82.  The region’s average PPP in the first quarter of 2019 was recorded at PhP0.85and in the second quarter of 2020 at PhP0.84.

During the first quarter of 2020,the PPP in the province was stable from April to June at PhP0.87.

Similarly, in the same quarter a year ago, the PPP in the province remained at PhP0.89 from April to June.

TECHNICAL NOTES

The Philippine Statistics Authority 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

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. 

2. 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. 

3. 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. 

4. 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 15^th to 17^th 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. 

3.  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. 
4. Geographical location – the outlet is conveniently located and is accessible to the majority of consumers in the area. 

5.  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 purchasing power of the peso (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 which 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

/RBB