Inflation is a critical variable impacting decision-making and policy direction. For the most part, decision-makers are only able to appreciate the headline inflation number. This may ignore significant developments which underlie this headline number. There are two analytical frameworks which address this – looking at month on month inflation and understanding regional differences. As an annual calculation, the headline inflation number may miss important directional changes that have taken place in more recent months. Second, regional differences can be significant as to the magnitude and source of inflation.
One example in the September numbers is quite important. The headline inflation number of 6.1% in September shows transport costs particularly diesel and gasoline decreasing significantly. More recent data, however, show that not only have the costs of both items changed direction but have done so in a significantly notable way.
Thus, it is helpful in forming more impactful decisions to look at not just one number but to consider going into more detail into the numbers.
Highlights
- Philippines
- Headline inflation saw the CPI increase by 6.1% in September 2023 vs September 2022. This is an acceleration compared to the previous month which saw inflation at 5.3%.
- The main driver of annual inflation is the increase in the rice price index which ballooned by 17.9%.
- Decreases in the cost of electricity and transport costs tempered the inflationary environment for the period.
- The headline inflation number reflects a 1.1% increase in the CPI compared to August 2023. This is the second straight month of month-on-month inflation over 1%, a circumstance which has happened only three other times in the previous 17 months.
- The 8.4% increase in rice prices, again, was the single largest contributor to monthly inflation. This was followed by increases in the prices of diesel (+7.0%) and gasoline (+4.1%).
- Iloilo Province
- Headline inflation in the province of Iloilo was 6.5% in September 2023 compared to 5.1% in August.
- Food and Non-alcoholic beverages rose 10.9% year on year to account for a significant portion of inflation largely a result of the rice index increasing by 12.6%.
- Month on month inflation was 1.0%, slightly lower than the national average.
- A notable statistic is the rise in prices in the Education Services sector which was up 9.3% year on year and 1.8% relative to August 2023. The main sub-sectors driving this rise were the early childhood education services and primary education.
Philippines
Headline inflation for the Philippines was reported by the Philippine Statistics Authority to be 6.1% for the month of September 2023. This reflected a rise in the Consumer Price Index (CPI) to 123.9 from 116.8 in September 2022.
The food and non-alcoholic beverages component of the CPI was the biggest contributor to the over-all CPI increase, increasing by 9.7% during the periods compared. Significant increases were reported for rice (+17.9% rise in prices), bread and bakery products (8.7%), vegetables (+29.6%), cane and beet sugar (+9.6%) and soft drinks (+7.9%), among others.
Other notable contributors to the rise in the CPI included the cost of water supply (+12.2%) and the cost of dining in restaurants, cafes, and the like (+7.1%).
On the other hand, reductions in certain components tempered the rise in inflation. This included the decreases in the costs of electricity (-4.0%), diesel (-12.7%), gasoline (-2.4%), and passenger transport by sea and inland waterway (-5.8%).
Over-all, the inflation rate for the last month is significantly about rice. Rice inflation accounted for 1.6% of the 6.1% rate or 26.1% of the total.
The 6.1% September inflation is an acceleration from the 5.3% inflation rate recorded in August. This reflected a month-on-month (MoM) inflation rate of 1.14% from August of this year to September. This follows a 1.07% MoM rate in August relative to July. This is a worrying trend. MoM rates above 1% have been rare. Since January 2020 (last pre-pandemic month),there have only been 5 instances where the MoM rate has exceeded 1% and two of these have now happened in the past two months.
Similar to the year-on-year data, food, and non-alcoholic beverages, particularly rice (+8.4%) and some vegetables have been large culprits in the rise of monthly inflation. This has now been exacerbated by inflationary pressures brought about by the rise in fuel prices. The diesel index has increased by 7.0% in the September vs August data while gasoline has gone up by 4.1%.
Regional Comparisons
Among the 17 regions in the country, Central Luzon recorded the highest rate of year-on-year inflation at 7.9%. The other regions which reflected higher y-o-y rates of inflation relative to the country average included MIMAROPA, Northern Mindanao, Western Visayas (+6.6%), and BARMM.
For month-on-month inflation, Northern Mindanao recorded the highest rate at 2.3%. Other regions reporting higher rates of m-o-m inflation relative to the country average included BARMM, CAR, the Davao Region, the Zamboanga Peninsula, Eastern Visayas, the Bicol Region, Central Luzon, and Cagayan Valley.
Western Visayas, on the other hand recorded m-o-m inflation of 0.8%, falling below the national average.
Note that the national averages are heavily influenced by the National Capital Region which accounts for 20.3% of the CPI in terms of weighting.
One way of explaining significant differences in the y-o-y and m-o-m inflation numbers reflect the timing of inflationary factors within an area. As an example, Eastern Visayas which has a relative low y-o-y inflation rate of 4.9%, saw a significant spike in m-o-m inflation of 1.7% in September. In the 11 months prior to September, its m-o-m inflation rate average of 0.3% was lower relative to the national average of 0.4%. The reverse is true with Western Visayas which has a relatively high y-o-y rate but a low m-o-m rate. The average m-o-m rate of the region over the past 11 months was 0.5%. While it increased to 0.8% in September, this m-o-m rate was lower than the national average.
Western Visayas Provinces
As mentioned earlier, Western Visayas recorded an increase in prices with annual inflation of 6.6% and in month-on-month inflation of 0.8%. Among the Western Visayas provinces and HUCs, Negros Occidental had to highest annual inflation 7.6%. The Province of Iloilo recorded 6.5% annual inflation while Iloilo City was at 6.3%. For monthly inflation, Antique recorded the highest at 2.2%. The Province of Iloilo, meanwhile, was at 1.0% while Iloilo City was at 0.7%.
On the whole, while both Iloilo and Iloilo City recorded higher annual rates than the national average, both recorded monthly inflations which were lower than the national average. This signals a slightly better current environment relative to the country.
Iloilo Province
After hitting a post-pandemic peak of 10.2% in February of this year, annual inflation had been trending downwards bottoming out at 5.1% in July. The reported inflation rate of 6.5% is the highest for the province since the June inflation number of 6.6%.
Food and non-alcoholic beverages were the leading cause of inflation with the price index for this index rising by 10.9% In terms of the magnitude of the inflation, this was followed by education services (+9.3%) and alcoholic beverages and tobacco (+9.2%). Transport was the only component which saw a decline in prices at -2.2%.
Considering the weightings of the various components in the CPI, the food and non-alcoholic beverages sector accounted for close to 2/3 (63.6%) of the increase in prices (see chart). In terms of specific items, rice saw the biggest increase in prices at 12.6%. Other items which saw significant increases within this CPI component included bread and bakery products, macaroni, noodles and similar pasta products, meat, fish and other seafood, cheese, eggs, vegetables, sugar, fruit and vegetable juices, and soft drinks.
Housing, water, electricity, gas, and other fuels which accounts for 21% of the CPI was the second largest contributor to the rise in prices. Annual inflation for this sector was at 2.8%. Restaurants and accommodations were the third largest contributor with inflation being at 5.7%.
The price deflation in the Transport Sector was driven mainly by the year-on-year decline in diesel (11.6%) and gasoline prices (-2.2%).
Month on month inflation has been quite volatile for the province. In September, monthly inflation was at 1%, slightly lower than the national average. This is the second straight month when month on month inflation has gone up.
After a substantial decline in March, month on month inflation has been creeping up with a slight pause in July. Food and non-alcoholic beverages were the leading cause of inflation with the price index for this index rising by 2.4% In terms of the magnitude of the inflation, this was followed by education services (+1.8%) and transport (+1.6%). Housing, water, electricity, gas, and other fuels (-2.1%) and furnishings, household equipment and routine household maintenance (-0.2%) both saw price declines. The price indices for restaurants and accommodation services and financial services were flat.
Similar to the year-on-year figures, food and non-alcoholic beverages accounted for the bulk of the price increases. Rice (+4.1%), meat (+3.9%), fish (+5.0%), and green leguminous vegetables (+16.7%) saw significant month on month increases.
Transport costs have continued their upward movement which started two months ago. Month on month costs increased by 1.6% for September. This follows a 2.1% increase in August. In September diesel (+7.8%) and gasoline (+3.9%) prices saw notable increases.
Education services saw a significant month on month increase of 1.8%. This was largely the result of significant increases in early childhood education services (+5.9%) and primary education (+3.8%).