La Union’s annual average inflation climbs to 3.0% in 2021

The annual average Consumer Price Index (CPI) in La Union in 2021 was posted at 118.7.    This means that on the average, prices of goods and services in the province have increased by 18.7 percent from the base year 2012.  In 2020, the annual average CPI in the province was recorded at 115.2. 

The annual average headline inflation in the province accelerated to 3.0 percent in 2021 from 1.9 percent in 2020.

The uptrend in the average annual inflation of the province from 2020 to 2021 was contributed by faster annual average inflation in the indices of food and non-alcoholic beverages, 3.3 percent to 3.5 percent;   housing, water, electricity, gas and other fuels, -2.9 percent to 2.1 percent; health, 1.1 percent to 1.9 percent; and transport,  -3.1 percent to 6.3 percent.  Meanwhile, the average annual inflation rate in the recreation and culture index, from -0.1 percent in 2020, was recorded at zero growth in 2021. 

On the contrary, slowdowns from 2020 to 2021 were observed in the average annual inflation in the indices of alcoholic beverages and tobacco, 17.9 percent to 10.4 percent; clothing and footwear, 3.5 percent to 2.7 percent; furnishings, household equipment and routine maintenance of the house, 2.5 percent to 1.6 percent; communication, 0.3 percent to 0.0 percent; education, 0.1 percent to 0.0 percent; and restaurant and other miscellaneous goods and services, 3.7 percent to 1.5 percent. 

Higher average annual adjustment of the food index to 3.7 percent in 2021 from 3.3 percent in 2020 contributed to the faster average annual increment of the food and non-alcoholic beverages index.  

In contrast, the annual average growth of the non-alcoholic beverages index decelerated to 1.7 percent in 2021 from 2.2 percent a year ago.

By food subgroups, faster average annual gains at double digits were recorded in following:  corn, 19.3 percent from 4.8 percent; meat, 11.5 percent from 7. 0 percent; fruit, 11.8 percent from 2.9 percent; and vegetables, 14.6 percent from -0.7 percent.  Faster average annual inflation were also recorded in the indices of bread and cereals, -0.6 percent from -1.0 percent; and rice, -1.5 percent from -1.7 percent.

On the other hand, slower annual average inflation were observed in the indices of other cereals, flour, cereal preparation, bread, pasta and other bakety products, 1.7 percent from 1.9 percent; fish, -0.6 percent from 10.2 percent; milk, cheese and eggs, 1.5 percent from 5.9 percent; oils and fats, 2.7 percent from 2.8 percent; sugar, jam, honey, chocolate and confectionery, 1.0 percent from 1.3 percent; and food products not elsewhere classified, -0.2 percent from 8.6 percent.

In 2020, the headline inflation in La Union was recorded at 1.4 percent in January.  Inflation continued to accelerate in February, March, and April at 1.5 percent, 1.8 percent, and 2.4 percent, respectively.  Inflation slowed down to 1.7 percent in May but registered higher annual growth in June at 1.9 percent.   It again decelerated to 1.6 percent and at 1.1 percent in July and August, respectively.  Inflation accelerated by 1.4 percent in September but moved at a slower pace in October at 1.2 percent.   Inflation rose by 2.5 percent in November and continued to pick up by 3.0 percent in December.

Inflation in the province further accelerated to 3.8 percent in January 2021. Meanwhile, a downtrend was observed as the inflation slowed down to 3.0 percent in February and further eased to 2.6 percent and 2.0 percent in March and April, respectively. In May, June, July, August, and September 2021, an uptrend was observed in the province’s inflation as it continuously rose to 2.6 percent, 2.8 percent, 3.0 percent, 3.9 percent, and 4.0 percent, respectively.  Inflation eased in the last quarter of 2021 at 3.9 percent, 3.3 percent, and 2.1 percent in October, November and December, respectively.

In 2021, the highest annual inflation was posted in September at 4.0 percent while the lowest rate was recorded in April at 2.0 percent.  In 2020, the highest inflation was posted in December at 3.0 percent while the lowest rate was recorded in August at 1.1 percent.

Purchasing Power of the Peso

The average Purchasing Power of the Peso (PPP) in La Union went down to PhP0.84 in 2021 from the average PPP of PhP0.87 in 2020.  This means that the purchasing capability of PhP1.00 in 2012 decreased by 16 centavos in 2021.  This further means that the same basket of goods and services worth PhP84.00 in 2012 can be bought at PhP100.00 in 2021.

In 2020, the PPP in La Union was stable at PhP0.87 from January to October.  It decreased to PhP0.86 in November and further went down to PhP0.85 in December.

The PPP in the province continued to decrease to PhP0.84 in January 2021.  In February 2021, the PPP increased to PhP0.85 and remained stable until June 2021. The PPP in the province decreased to PhP0.84 in July 2021 and remained constant until October 2021.  It went down to PhP0.83 in November 2021 and remained until December 2021.

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

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 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:

a. 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. 

b. 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. 

c. 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. 

d. 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 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