La Union’s CPI increased to 116.0 in August 2023
The Consumer Price Index (CPI) in La Union in August 2023 went up to 116.0. This means that on the average, prices of goods and services in the province have increased by 16.0 percent from the base year 2018. The province’s CPI was posted at 110.2 in August 2022.
Meanwhile, Ilocos Region’s CPI was recorded at 116.5 and 121.9 in August 2022 and August 2023 respectively, higher than La Union’s CPI in the said periods.
La Union’s inflation climbed to 5.3 percent in August 2023
La Union’s headline inflation rose to 5.3 percent in August 2023 from 2.3 percent in July 2023. This is the highest recorded headline inflation of the province since February 2023. The average inflation rate from January to August 2023 was recorded at 4.4 percent. In August 2022, inflation rate was posted at 3.3 percent. (Table A and Figure1)
In 2022, the headline inflation in La Union was recorded at 0.9 percent in January. Inflation continued to accelerate in February, March, and April at 2.1 percent, 3.0 percent, and 4.4 percent, respectively. Inflation slowed down in May at 4.2 percent but moved at a faster rate in June at 4.6 percent. Inflation eased in July at 4.3 percent and decelerated further in August at 3.3 percent. Inflation accelerated in September at 3.8 percent and continued to climb in the last quarter of 2022 at 4.0 percent, 4.4 percent, and 4.9 percent in October, November, and December, respectively.
In January 2023, inflation in the province continued to move at a faster rate of 6.7 percent but slowed down in February at 6.2 percent. Inflation in the province exhibited a downtrend from March 2023 to July 2023. In August 2023, inflation in the province picked up to 5.3 percent.
Similarly, Ilocos Region’s headline inflation increased to 4.6 percent in August 2023 from 3.6 percent in July 2023. In August 2022, inflation in the region was recorded at 6.2 percent.
The uptrend in the inflation of the province in August 2023 was primarily brought about by the higher year-on-year increase in the index of the heavily weighted food and non-alcoholic beverages at 10.2 percent from 4.5 percent in July 2023. This was followed by transport with a faster annual growth of 1.3 percent in August 2023 from an annual decline of -5.0 percent in July 2023. The third main contributor to the uptrend of the headline inflation of the province in August 2023 was observed in housing, water and electricity gas and other fuels with 4.0 percent inflation rate from 3.2 percent in the previous month.
Moreover, faster annual increment was noted in the furnishing, household equipment, and routine household maintenance index at 3.2 percent in August 2023 from 2.9 percent in July 2023. In addition, education services index recorded zero growth in August 2023 from an annual decline of -0.4 percent in July 2023.
On the contrary, slower annual growth was observed in alcoholic beverages and tobacco at 4.0 percent during the month from 4.6 percent in July 2023. Personal care, and miscellaneous goods and services also recorded lower inflation rate at 1.7 percent in August 2023 from 1.9 percent in July 2023.
Meanwhile, the indices of the following commodity groups retained their respective previous month’s annual inflation rates:
Clothing and footwear, 3.8 percent;
Health, 2.3 percent;
Information and communication, 1.4 percent;
Recreation, sport and culture, 1.3 percent;
Restaurant and accommodation services, -0.2 percent; and
Financial services, 0.0 percent.
Food inflation at the provincial level accelerated in August 2023 at 10.9 percent from 4.7 percent in July 2023. In August 2022, food inflation was lower at 2.2 percent.
The upward trend in the food inflation of the province in August 2023 was primarily contributed by faster annual growth in the index of rice at 23.5 percent from 1.7 percent in July 2023. This was followed by meat and other parts of slaughtered land animals with an inflation rate of -0.9 percent during the month from -4.3 percent in July 2023. The third contributor in the uptrend of food inflation in August 2023 was the higher annual gain in the index of vegetables, tubers, cooking bananas and pulses at 40.3 percent during the month from 31.3 percent in the previous month.
Faster annual inflation rates during the month were also observed in the indices of the following food items:
Fish and Other Seafood, 10.5 percent from 6.4 percent;
Fruits and nuts, -0.3 percent from -1.3 percent; and
Ready-made food and other food products not elsewhere classified, 2.7 percent from 2.3 percent.
In contrast, lower year-on-year growth rates during the month were noted in the indices of the following food groups:
Flour, bread and other bakery products, pasta products, and other cereals, 5.3 percent from 5.9 percent;
Milk, Other Dairy Products, and Eggs, 5.6 percent from 11.2 percent; and
Sugar, Confectionery and Desserts, 8.7 percent from 15.9 percent.
The index of oils and fats retained its previous month’s inflation rate of 5.1 percent while the annual inflation in the index of corn was recorded at zero growth for the eighth month in a row.
PPP in La Union decreased to PhP0.86 in August 2023
The Purchasing Power of the Peso (PPP) in La Union went down to PhP0.86 in August 2023. The PPP of PhP0.86 means that the purchasing capability of PhP1.00 in 2018 decreased by 14 centavos in August 2023.
The January 2022 PPP in La Union was recorded at PhP0.93 and remained in February 2022. It went down to PhP0.92 in March 2022 and further decreased to PhP0.91 in April 2022. The PPP in the province remained at PhP0.91 in May 2022 and June 2022. The PPP decreased to PhP0.90 in July 2022 but increased in August 2022 at PhP0.91. It again went down to PhP0.90 in September 2022 and remained in October 2022. The PPP in the province decreased in November 2022 at PhP0.89 and remained in December 2022.
In January 2023, the PPP in the province continued to decrease to PhP0.87 and remained in February 2023. In March 2023, the PPP of the province increased to PhP0.88 and was stable until July 2023. In August 2023, the PPP of the province decreased to PhP0.86.
La Union’s PPP in August 2023 was higher than Ilocos Region’s PPP of PhP0.82. The region’s PPP was posted at PhP0.83 in July 2023 and at PhP0.86 in August 2022.
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 prices of goods and services commonly purchased by consumers relative to a base year. It is most widely used in the calculation of inflation rate purchasing power of the peso (PPP). The CPI series also serve as basis for economic analysis, collective bargaining agreements, wage adjustments, and for monitoring the effects of government economic policy on households.
Inflation rate is defined as the annual rate of change or the year-on-year change in the CPI. On the other hand, the PPP is a measure of the real value of the peso in a given period relative to a chosen reference period.
Rebasing of CPI to Base Year 2018 and Adopting the Chained Laspeyres Formula in Index Computation
The PSA has rebased the CPI for all income households to base year 2018, from base year 2012. The methodology of rebasing the CPI to base year 2018 was approved by the PSA Board through the PSA Board Resolution No. 15 Series of 2021.
The PSA has started releasing the 2018-based CPI for All Income Households on 04 February 2022. The rebasing to 2018 is the 12th base period and the 11th rebasing for CPI. This was announced in Press Release Number 2022-01 dated 04 January 2022. The CPI series for all income households for January 2022 onwards shall be 2018-based.
1. Identification of the Base Year
Base period is a reference 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 rebased from base year 2012 to base year 2018.
The rebasing of the CPI is done periodically by the PSA due to the following: 1) to ensure that the CPI market basket continues to capture goods and services commonly purchased by households over time; 2) to update expenditure patterns of households; and 3) to synchronize its base year with 2018 base year of the Gross Domestic Product and other indices produced by PSA such as the Producer Price Index (PPI) for Agriculture; PPI for Manufacturing; and Value of Production Index (VaPI), Volume of Production Index (VoPI), and Value of Net Sales Index (VaNSI) for Manufacturing.
The year 2018 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 commonly purchased by the households.
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.
The market basket for the CPI for All Income Households is updated using the results of the 2021 Survey of Key Informants (SKI). The survey, which was undertaken in March 2021, was conducted nationwide to store managers store managers, sellers, or proprietors in order to obtain information on the most commonly purchased goods and availed of services by the households.
The commodities in the 2018-based CPI market basket are grouped according to the 2020 Philippine Classification of Individual Consumption According to Purpose (PCOICOP) 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 2018-based CPI were derived from the expenditure data of the 2018 FIES. The weight for each item of expenditure is the proportion of the expenditure of commodity/group of commodities to the total national expenditure. The sum of the weights of the commodity groups at the national level is equal to 100.
The table below shows the comparison of the expenditure weights between the 2012 and 2018-based CPI for the Philippines.
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:
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.
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.
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.
Geographical location – the outlet is conveniently located and is accessible to the majority of consumers in the area.
5. Index Computation
The 2018-based CPI series uses the same method of computation as the 2012-based CPI series, which is the chained Laspeyres formula.
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 2018 as the base year:
6. Dissemination of Reports
Data are available five days after the reference month which are posted at the PSA website (www.psa.gov.ph). Data series are also uploaded at the OpenSTAT database portal of the PSA website.
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, PhD
Chief Statistical Specialist
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