The Philippines’ Decelerating Inflation Rate
Do you still remember the soaring inflation rate around this time last year? That was a solid 6.7% in both September and October, which made a clamor in our community – resulting to a sudden increase in people’s interest in economic data and, of course, a ton of online memes. Well guess what? Our inflation rate has decelerated since then. In fact, it was at a stunning 1.7% last month (August 2019) – lowest since October 2016! Look at the table from the Philippine Statistics Authority below.
Inflation in a Nutshell
Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period. It is the constant rise in the general level of prices where a unit of currency buys less than it did in prior periods. Often expressed as a percentage, inflation indicates a decrease in the purchasing power of a nation’s currency. There are other terms you may also encounter in case you decide to study inflation even further, like core inflation, headline inflation, deflation and hyperinflation. Ultimately, the data has “prices” to look at.
Good News or Bad News?
The deceleration is certainly good news considering we, Filipinos, are big in spending for consumption. And the fact that the inflation rate for food and non-alcoholic beverages prices has slowed down even further, the goods we usually look out for may not feel increasingly expensive in the next coming months or so. This means retained purchasing power for us in the community.
But if you look at the positive effects of inflation, this deceleration may not be as good for some. For example, individuals with tangible assets, like property or stocked commodities, may like to see some inflation as that raises the value of their assets which they can sell at a higher rate. Inflation promotes investments, both by businesses in projects and by individuals in stocks of companies, as they expect better returns than inflation. Optimum level of inflation is required to promote spending to a certain extent instead of saving. If the purchasing power of money remains the same over the years, there may be no difference in saving and spending. It may limit spending, which may negatively impact the overall economy, because the decreased money circulation will slow overall economic activities in our country. A balanced approach is required to keep the inflation value in an optimum and desirable range. So here’s a statement you’d love to here – let’s go buy and spend some cash!
What’s for sure is that uncertainty would be the biggest enemy here. If prices are highly volatile and inflation is unpredictable, it will be difficult and challenging not just for businessmen but for consumers and investors as well. Hence, a smoothly and slowly accelerating or decelerating inflation rate is definitely ideal.
More Numbers to Crunch
According to PSA’s report, the slowdown of inflation in August 2019 was mainly due to the slower annual increase in the index of the heavily weighted food and non-alcoholic beverages at 0.6%. Moreover, the following commodity groups posted slower annual rates during the month:
- Housing, water, electricity, gas, and other fuels, 1.8%;
- Health, 3.1%;
- Recreation and culture, 1.8%; and
- Restaurant and miscellaneous goods and services, 3.2%.
For 5 consecutive months now inflation of communication index remained at 0.3%.
Inflation rate also differs per geographical location. For instance, last month, NCR’s inflation rate is at 1.4% while that of the outside regions is at 1.8%.
What Now?
Judging by the trend, it looks like we will not be encountering the same inflation surprise we’ve faced last year, anytime soon. This means more shopping spree and much more active consumption for us. We just have to be extremely wise about this, and start spending on more essential things and tasks. Look back and remember the products and services that you have been wanting to avail. Make your NOW more meaningful than ever – as there is no other better timing! You may also want to spread the enthusiasm around the decelerating inflation in the same manner you did during inflation rate shock last year.
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