ONE forever-Yellow opinion writer was delighted that President Ferdinand “Bongbong” Marcos Jr. seemed to dispute the Philippine Statistics Authority’s report of a 6.1 percent June inflation when he said he “had to disagree with that number, we are not that high.” That writer even maliciously claimed that Marcos will arm-twist that PSA to change its numbers, or transfer its officials to some other post. His column’s title: “PSA to tweak 6.1% inflation for BBM?”
Obviously, that writer’s decades of writing had not changed at all his proclivity of commenting on something he really knows little about. To be fair though, I had been mainly an economic and business writer for most of my journalism career, and I know for a fact that even most reporters in this specialized beat are confused about this economic measure called “inflation.”
Okay, almost all know that inflation is the increase in prices of a chosen group (“basket”) of commodities and is measured as the percentage increase from one earlier period to a later one. For easier computation, a particular year is chosen as the “base” year with prices valued at 100 points. The PSA changed its base year from 2012 to 2018 as its base year in 2020.
Thus with 2018 as base year at 100 index points, and the “Consumer Price Index” (CPI) on June 2021 at 108.3 (an increase of 8.3 in prices from June 2018), and then 114.9 on June 2022, the inflation from June 2021 to June 2022 is 6.1 percent (114.9 minus 108.3 divided by 108.3, then multiplied by 100). This is also referred to as the annual (or annualized) inflation rate for a particular month.
2019 TO 2021 ACTUAL FROM WORLD BANK, 2022, ESTIMATE FROM STATISA.COM
The PSA and other institutions usually mean this when they report the most current inflation figure, which of course uses the month before it is reported, which is the latest month for which the data is available. So, just a few days ago, the PSA reported “June 2022” inflation at 6.1 percent, which means the increase in prices of commodities in the one-year period from June 2021 to June 2022.
But economic policy makers, to better track inflation and its characteristics, use another measure, which is the average of the annual inflation rates of the last 12 months.
This is what the PSA also reported recently, at 4.4 percent — which is the figure BBM was referring to. This 4.4 percent is the average of the annual inflation rates of the months from January to June 2022 (See Table).
These two different types of reporting inflation are used for different types of analysis.
The annual rate shows how much prices have risen in one year, without any reference to long-term trends. For instance, the June inflation of 6.1 percent was a spike, due to the 17 percent increase in transport costs, as the rise in petroleum prices in the past months finally made a major impact on inflation. Indeed, the 6.1 percent June rate does not reflect the much lower rates in the past five months.
Indeed, for 2021 and the first three months of the year, annual inflation was in the 3 percent to 4.2 percent range, indicating that inflation was not going out of control. This is extremely useful data for monetary authorities that have the crucial, sensitive task of raising interest rates in order to control inflation.
The PSA really is to blame. Its report (See image) was presented in a way that BBM’s attention could only but be drawn to the 4.4 percent “year-to-date” inflation figure rather than to the 6.1 percent June year-on-year inflation rate.
Whichever measure is used though, we do have by far the highest inflation in the region, which emphasizes the huge challenge facing BBM. Projections though, indicate that this year, factors pushing up inflation will be catching up with our neighbors, with our rate going down from 3.9 percent to 3.3 percent while those of our neighbors will be increasing.
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