2. INFLATION DEFINITION:
- Inflation is when the prices of most goods and services
continue to creep upward. When this happens, your standard
of living falls. That's because each dollar buys less, so you
have to spend more to get the same goods and services.
If inflation is mild, it can actually spur further economic
growth. If prices rise slowly and gradually, it can encourage
people to buy now and avoid future price increases. This
increases demand, driving further economic growth. In this
way, a healthy economy can usually sustain a 2% inflation
rate.
3. CAUSES OF INFLATION:
There are three causes of inflation:
• The first cause is called demand-pull inflation. This occurs
when demand for a good or service rises, but supply stays
the same. Buyers become willing to pay more to satisfy their
demand. Demand-pull inflation can be accompanied
by irrational exuberance.
4. • The second cause is cost-push inflation. It starts when the
supply of goods or services is restricted for some reason,
while demand stays the same. When the supply of labor is not
enough to meet demand, it can create wage inflation. In the
past, inflation in prices generally led to wage inflation, so that
companies could retain good workers. However, competition
from technological alternatives (such as robotics) and lower-
income countries means that wages haven't kept up with
prices. Higher prices combined with stagnant wages means
your standard of living has decreased.
• The third cause is overexpansion of the money supply.
That's when a glut of capital in the market chases too few
opportunities. It's often a result of expansive fiscal or
monetary policy, creating too much liquidity in the form of
dollars or credit.
6. Inflation rose slightly to 3.0 percent in January from 2.9
percent in December last year of 2012.
The slightly higher inflation outturn was also at the low
end of the Government’s inflation target range of 3-5
percent for 2013. Likewise, core inflation, which excludes
certain food and energy items to measure generalized
price pressures, increased to 3.6 percent from 3.3
percent in the previous month. Month-on-month headline
inflation was higher at 0.5 percent from -0.1 percent in
December.
7. The slightly higher headline inflation rate for January was
traced mainly to higher food, electricity, and alcoholic
beverages and tobacco prices. Tight domestic supply
conditions, triggered by the recent weather-related
production disruptions, led to higher prices of food,
particularly fish, meat, and fruits. Likewise, the upward
adjustment in electricity charges as a result of scheduled
outages of some natural gas and coal-fired power plants
contributed to the rise in inflation. The Sin Tax Reform Act of
2012, which became effective during the month, also pushed
alcoholic beverages and tobacco inflation higher.
8. Inflation Rate in Philippines is reported by the The National
Statistics Office (NSO). Historically, from 1958 until 2013,
Philippines Inflation Rate averaged 9.04 Percent reaching an all
time high of 62.80 Percent in September of 1984 and a record
low of -2.10 Percent in January of 1959. In Philippines, the
most important categories in the Consumer Price Index are:
food and non-alcoholic beverages (39 percent of total weight);
housing, water, electricity, gas and other fuels (22 percent) and
transport (8 percent). The index also includes health (3
percent), education (3 percent), clothing and footwear (3
percent), communication (2 percent) and recreation and culture
(2 percent). Alcoholic beverages, tobacco, furnishing,
household equipment, restaurants and other goods and
services account for the remaining 15 percent.
