DOF Economic Bulletin on January 2018 Inflation 09 February 2018
Inflation rate in the first month of 2018 surged to 4% on the back of a
surge in prices of sin products and petroleum products.
The prices of sin products increased by 12.3% as a major producer started
complying with sin taxes, adjusting its retail prices accordingly. Under the sin tax law passed in 2012, the adjustment in sin tax rates starting January 2018 was only 4%.
The utilities and fuels sub-group saw average price increase by 7.2%,
albeit slower than the 8.4% registered in December, due to the 9%
adjustment in world petroleum prices last November and another1.4% in December.
Fish prices rose 12% as fishery production was affected by bad weather
and rough seas. Likewise, meat prices rose 6.2% after poultry production slowed following a sharp price decline (-7.7%) in the third quarter.
The price of staple food rice has remained stable and that of vegetables
normalized after a price dip in December.
The 4% inflation rate is still within the 2-4% target range although it is at
the topmost end of the range.
Table 1: Inflation Rate by Commodity Group vs DOF Forecasts and Contribution to Inflation
Commodity Group
Weight
Jan-17 Dec-17 Jan-18
Contributio n to Jan-18 Inflation
(ppts)*
in CPI
All items 100.00
2.70
3.30
4.00
4.00 Food and non-alcoholic
beverages
38.98
3.40
3.50
4.50
2.00
Rice
8.92
1.80
1.10
1.40 0.10
Vegetables
3.19
8.60 -
0.90
1.80 0.10 Non-alcoholic beverages
2.69 1.30
1.10
2.80 0.10 Alcoholic beverages and
Tobacco
1.01
5.60
6.40
12.30 0.30 Alcoholic Beverages
0.99
3.70
3.50
4.80 0.10
Tobacco
59.02
6.90
8.40
17.40 0.30
NON-FOOD
2.95
2.00
2.90
3.10 1.60 Clothing and footwear
22.47
2.80
1.80
1.80
0.10
Housing, Utilities & Fuels
7.07
1.80
3.80
3.70 0.70 Electricity, Gas & Other
Fuels
3.22
2.50
8.40
7.20 0.40 Furnishings, household
equipment
2.99
2.30
1.90
2.00 0.10
Health
7.81
2.60
2.20
2.60 0.10
Transport
2.26
2.40
2.40
3.20 0.20
Communication
1.93
0.10
0.40
0.40 - Recreation and Culture
3.36
1.90
1.50
1.40 - Education
12.03
1.80
2.20
2.20
0.10
Restaurants & Misc. Services
2.20
3.00
3.70
0.40
Core
2.50
3.00
3.90 Source of Basic Data: PSA
Table 2: Prices of Selected Commodities
Item Jan-
17 Dec-
17 Jan-
18 Meralco rate per kWH for 200KW/mo
consumption
8.09
9.25 8.72 Meralco Generation Charge per kWH
3.70
4.60 4.08 Diesel (PHP/litre), NCR
30.89
36.20
39.31 Gasoline, RON 95 (PHP/litre), NCR
47.34
48.12 50.65 Sources of Basic Data: Meralco, DOE
higher food and non-food prices alike. n was affected by lower output arising from weather disturbances and rough seas. The last was affected by the tax on sugar-sweetened beverages (SSB) in the TRAIN Law.
DOF View
The rise in inflation in January is traced mainly to the temporary price
adjustment in sin products to recoup the higher costs of sin tax compliance as the BIR improved its collection efficiency and sharpened its resolve to run after big tax evaders.
The rise in prices of products affected by TRAIN is benign---2.8% for non-
alcoholic beverages affected by the tax on sugar-sweetened beverages and
7.2% for fuels which may be due mainly to the 10.5% cumulative price rise in imported crude oil in November and December.
