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.

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.

• 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.

INFLATION RATE OF THE

PHILIPPINES

2012 – 2013

NSO

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.

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.

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.

SOURCES :

http://useconomy.about.com/od/pricing/f/Inflation.htm

http://census.gov.ph/statistics/survey/price/summary-

inflation-report-consumer-price-index-2006100-

january-2013

http://www.tradingeconomics.com/philippines/inflatio

n-cpi