December inflation eases to 1-year low

THE OVERALL year-on-year increase in prices of widely used goods and services slowed to its lowest level in a year in December as food and transport prices eased, bringing the full-year average above the government’s target.

Preliminary data from the PSA showed headline inflation eased to 3.6% in December from 4.2% in November.

December’s inflation print was the slowest reading in 12 months or since the 3.5% reading in December 2020.

The latest headline figure is lower than the 3.9% median in a BusinessWorld poll conducted late last week, but falls within the 3.5%-4.3% estimate given by the Bangko Sentral ng Pilipinas (BSP) for December.

Inflation averaged 4.5% for 2021, higher than the 2.6% recorded in 2020. This breached the BSP’s 2-4% target band as well as the revised 4.4% forecast for the year.

Core inflation, which discounted volatile prices of food and fuel, stood at 3.6% percent in December — slower than the previous month’s 4.2% but higher than 3.5% a year earlier. It averaged 3.3% in 2021.

“The main source of the downward trend of the December 2021 overall inflation was primarily brought about by the slower annual increase in food and non-alcoholic beverages at 3.1% in December 2021, from 3.9%in November 2021,” the PSA said in a statement.

The food-alone index decelerated to 3.2% in December, from 3.9% in November and 4.9% in December 2020.

The PSA also noted easing annual rates in the following indices: transport (to 6.1% in December from 8.8% in November); alcoholic beverages and tobacco (6.5% from 7.5%); health (3% from 3.2%); restaurant and miscellaneous goods and services (3.5% and 3.7%); furnishing, household equipment and routine maintenance of the house (2.3% from 2.4%); recreation and culture (0.9% from 1%); and clothing and footwear (1.8% from 1.9%).

Housing, water, electricity, gas, and other fuels picked up to 5% in December from 4.6% in November as well as communication, which inched up to 0.3% from 0.2%.

Similarly, the December inflation rate for the bottom 30% of households further slowed to 3.3% from 4.2% in November and 4.2% in December 2020. The inflation rate for this segment was the slowest in 14 months or since the 2.9% in October.

In 2020, the bottom 30% inflation averaged 4.8%.

CPI REBASED TO 2018
Separately, the PSA announced the rebasing of its consumer price index (CPI) — used to calculate the inflation rate — to a 2018 base from 2012 currently starting next month for the reporting of January 2021 inflation print onwards.

“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 the 2018 base year of the Gross Domestic Product and other indices produced by the PSA…,” the agency said.

Aside from the base year, the rebasing will also change the market basket, the weights, and index computation.

The 2018 rebasing is the 12th base period and 11th rebasing for the CPI, the PSA said. — Bernadette Therese M. Gadon