 Number: 2003-98 Date Released: December 19, 2003
The National Statistics Office (NSO), the primary statistical arm of the government, is set to issue new series of the Philippines’ monthly consumer price index (CPI) beginning with its January 2004 data release. According to NSO Administrator Carmelita Ericta, the new series shall have for its reference the year 2000. Thus on February 5, 2004, data users can expect the NSO to release two sets of the CPI as the new series shall be issued simultaneous with the 1994-based series. The monthly CPI is being targeted for release every 5th day after each reference month.
The CPI measures the changes in the price level of goods and services that most people buy for their day-to-day consumption. The CPI series, among others, is being used for economic analysis, for collective bargaining agreements, for wage adjustments, and for monitoring the effects of government economic policy. It is also most widely used in the calculation of the inflation rate and purchasing power of the peso. Changes in the CPI over a specific period of time (usually a month or a year), is the rate of inflation. Inflation, on the other hand, is equivalent to a decline in the purchasing power of peso (PPP). The PPP gives an indication of the real value of the peso (how much it is worth) in a given period relative to its value in a base period.
"It was necessary to shift the reference period to a more recent base year in order for the CPI to become more reflective of existing conditions," said Administrator Ericta. She added that since the last re-basing exercise, economic, social and technological changes have influenced Filipinos’ tastes and preferences and these, in effect may have resulted in changes in the consumption patterns of the population. Re-basing the CPI to year 2000 involves the updating of the basket of goods and services, and the set of weights which assigns the relative importance of the price changes of the goods and services in the basket. Historical Brief The 2000-based CPI is the eighth in the re-basing series. In 1945, the Bureau of the Census and Statistics (now NSO) constructed the Cost of Living Index for Manila with 1941 as base year. The market basket was composed of 66 commodities that represented goods and services customarily purchased by a family whose manner of living was considered that of a minimum subsistence level.
Since then, the index has undergone several revisions. The first revision of the Cost of Living Index for Manila was made in 1964. The years 1960 to 1962 were selected as the base periods and the base price was the average of the 1960, 1961 and 1962 prices. Weights were based on the results of the 1961 Survey of Family Income and Expenditures. The market basket consisted of 244 items. However, since the index neither measured the changes in kinds and amount of goods and services that a specific group of people bought, nor the total amount they spent for living; but rather, measures the monthly average changes in the retail prices of goods and services customarily purchased by families with annual income of not more than PhP2,400, the index was then more aptly called the Consumer Price Index (CPI) for Low Income Families in Manila. In 1965, the base year was changed to 1961.
Another revision was made in 1970. The base year was shifted from 1961 to 1966. Coverage was expanded to include various income groups. Consumer price indices were constructed for the low-, middle- and all-income households in each of the provinces as well as Manila and suburbs. In addition, CPI for high-income group was also constructed for Manila and suburbs. The market basket consisted of 249 items for low-income, 368 for middle-income, 242 for high-income and 479 for all-income households. In 1976, the CPI was again re-based with 1972 as reference year. However this time, only one set of CPI series was constructed-- the Consumer Price Index for All-Income Households-- for each province and each region including Metro Manila or the National Capital Region. The market basket consisted of 459 items. Three more re-basing of the CPI were done afterwards with 1978, 1988 and 1994 as reference periods. The 1978 base period was done in 1982 which utilized 1975 Family Income and Expenditures Survey (FIES) results updated to 1978 prices as weights. This series covered all-income households. The market basket contained 407 items. Then in 1992, CPI was again rebased to 1988. Weights were derived from the expenditure data of the 1988 FIES. A market basket for each of the 13 regions was established with the number of items ranging from 384 (for NCR) to 651 (for Region IV). Unlike in previous series where the composition of the market basket was determined by a technical committee (the Inter-Agency Committee on Price Statistics), the market basket used in this series was determined through the 1985 Commodity and Outlet Survey (COS) which was conducted using the sample households of the 1985 FIES. The 1985 COS was the first survey of its kind in the country with the purpose of identifying the market basket by asking sample households the commodities and services that they consumed most of the time and the type of outlets where these commodities and services are commonly purchased or availed of. The last rebasing exercise was done in 1996 with 1994 as base year. The expenditure data from the 1994 FIES survey results were used as weights. Individual provincial and city market baskets were constructed using the results of the 1994 COS undertaken by the NSO and the results of the validation work on the availability and saleability of the items in the 1988 market basket in the different geographical areas. There were no such baskets in the 1988-based series since the regional market baskets were used for the provincial CPIs.
The re-basing of the CPI from 1994 to 2000 is in accordance with National Statistical Coordination Board Resolution No. 13, Series of 2003, approved on December 12, 2003.
Some Salient Features of the 2000-Based CPI Market Basket Market basket is a term used to refer to a sample of goods and services that are commonly purchased and bought by an average Filipino household. The market basket used in the construction of the 2000 CPI was drawn from the results of the updating activity of the 1994 market basket. Updating of the 1994 market basket was done through an interview of key informants in various outlets as to the availability and saleability of the items they sell. Provinces and selected cities had their own market baskets. The number of items in the 2000 market basket was almost similar to the 1994 market basket which ran to as high as 753 for Negros Occidental and 703 for NCR to as low as 365 or Camiguin and 286 for Batanes. Market baskets for Guimaras, Biliran, Cagayan de Oro City, Saranggani and Apayao were added to the existing 84 provincial/selected city market baskets. The percentage of new items in the new market basket ranged from 0.7 percent in Batanes City to 64.0 percent in Cebu City and Eastern Samar. The retention of the items from the old basket to the new basket in terms of percentages was highest in Batanes (99.3 percent), followed by South Cotabato and General Santos City (97.2 percent). Meanwhile, Sulu maintained the 468 items in its old basket in the 2000-based CPI. The number of items comprising the market basket for all-income group for each province/city is shown below:
Weights The weights for the 2000-based CPI were derived from the expenditure data of the 2000 Family Income and Expenditures Survey (FIES), a nationwide survey that covered 41,000 households. Comparison of the 1994 and 2000 Weights (Philippines)
Comparison of the 1994 and 2000 Weights (NCR and
AONCR)
The share of food, beverages and tobacco (FBT) group to the total expenditure decreased to 50.03 percent in 2000 from 55.12 percent in 1994. The share of the food group also declined to 46.58 percent from 50.98 percent. Except for cereal preparations and meat whose shares correspondingly increased to 3.04 percent and 7.63 percent from their respective shares of 2.95 percent and 7.59 percent, the shares of the other food groups went down. The share for rice declined to 9.36 percent from 11.82 percent. Expenditure for beverages decreased to 2.25 percent from 2.65 percent and in tobacco, 1.19 percent from 1.49 percent. The share of clothing dropped to 3.00 percent in 2000 from 3.66 percent
in 1994. Likewise, the share of miscellaneous items also decreased to 7.33
percent from 8.51 percent due to the decline of the shares of household
furnishing and equipment and household operations to 1.76 percent and 1.23
percent, respectively from their corresponding 1994 shares of 3.16 percent
and 1.61 percent. The shares of the rest of the commodity groups went up. Housing and
Repairs (H&R) had a share of 16.80 percent in 2000 from 14.69 percent in
1994 as expenditures for rentals increased to 15.77 percent from 13.68
percent. The share of fuel, light and water (FLW) rose to 6.95 percent in 2000 from 5.74 percent in 1994 mainly due to the higher expenditure for light at 3.75 percent from 2.74 percent. The increase in the share of services to 15.89 percent in 2000 from 12.28 percent in 1994 was due to the higher expenditures for transportation and communication, 7.52 percent from 4.81 percent; educational services, 3.83 percent from 2.93 percent; and personal services, 2.06 percent from 1.75 percent.
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Page last revised: January 05, 2004