INFLATION

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WHAT IS INFLATION?

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.The percentage change in the value of the Wholesale Price Index (WPI) on a year-on year basis.

Causes of InflationDemand pull inflationa rise in general prices caused by increasing aggregate demand for goods and services.

Cost-Push Inflation -When output declines because of cost pressure on producers there will be a shortage in output markets and prices will rise as a result, ceteris paribus, meaning all else constant. -Prices may also rise as a result of uncertainty about future market conditions.

Cost push inflation can be caused by many factors

Rising wagesImport pricesRaw Material PricesProfit Push InflationDeclining productivityHigher taxes

Effects of InflationPositiveModerate inflation enables adjustment of wagesInflation enables adjustment of relative pricesInflation can boost growth

NegativeHigh prices of day-to-day goods High inflation creates uncertainty and can wipe away the value of savingsvery low inflation rate leads to very weak economic growth and very high unemployment

Latest Philippine Inflation Rate

ActualPreviousHighestLowestDatesUnitFrequency2.402.7062.80-2.101958 - 2015percentMonthly

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. This was last refreshed on Wednesday, March 4, 2015.

Comparison of the Past Inflation Rates of the Philippines Note:Annual variation of consumer price index (CPI) in %.Source:National Statistics Office.

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Countries Inflation Rate Reference Previous Highest Lowest UnitNorth Korea 55.0Jul/13704376.0030.00percentIran16.70Dec/1415.1059.02-3.27percentKyrgyzstan10.50Dec/1410.2032.45-0.54percentMongolia9.80Jan/1511.0031.90-1.90percentYemen9.49Nov/148.4924.770.25percentBhutan8.38Aug/148.5513.530.00percentNepal7.50Oct/147.5630.42-11.54percentTajikistan7.40Dec/147.1060.601.80percentUzbekistan6.80Nov/133.307.802.40percentIndonesia6.29Feb/156.9682.40-1.17percent

Highest Inflation Rates in Asia (Latest)

Inflation RateLast Reference UnitVenezuela 68.5Dec 2014percentNorth Korea 55Jul 2013percentUkraine 28.5Jan 2015percentCentral African Republic26Jun 2014percentSudan24Jan 2015percent

Top 5 Countries with the Highest Inflation Rate Based on the Latest Available Data

Socio Economic Issues Uncertainty

Inflation creates uncertainty, especially when inflation is unexpected and catches people off guard or when it fluctuates widely from month to month or year to year.The reason that most people, consumers and producers alike, do not like inflation is that they arerisk averse--they prefer a knowable, stable, and predictable life.

Haphazard Redistribution

Inflation can haphazardly redistribute income and wealth in ways that society might not want.

While inflation is an increase in the average price level, ALL prices do NOT increase at the same rate. When this happens, the owners of resource used in the production of goods with above average price increases also get relatively more income.