Low prices spur purchasing power, boost consumption

CEBU, Philippines - Cheaper food and fuel prices will spur consumers’ buying power, thus boosting domestic consumption, according to an economic planner.

Efren Carreon, director of the National Economic and Development Authority-7, said if prices of consumer goods will decrease sooner, this will definitely have a positive effect on consumers.

Department of Trade and Industry-7 director Asteria Caberte earlier told The FREEMAN consumers could expect lower prices of basic goods early March amid the tumbling global oil price.

Producers normally have a three-month inventory of their goods, Caberte explained, that's why reduced prices may not directly take effect at the time of the falling of oil cost.

Cheap oil, she noted, likely affected production in late December and early this month. By that, prices of newly manufactured goods should then be lower, Carreon also noted.

Easing inflation

If the trend of lower fuel costs continues, Carreon said this would further ease inflation which dipped to a 16-month low last month.

As petrol prices are cut to get on the oil price slump, inflation can be expected to fall further.

The Bangko Sentral ng Pilipinas expects 2015 inflation to average at 3 percent, lower than its previous estimate of 3.7 percent. The central bank also sets 2016 price growth at 2.6 percent compared with its previous forecast of 2.8 percent.

Philippine December inflation eased to 2.7 percent, the lowest since a 2.1 percent growth in August 2013 and after hitting a peak at 4.9 percent in July and August 2014. The slow rise in price growth was mainly attributed to sliding oil and transport prices and stabling food costs.

Those reductions have increased the public’s spending power. 

Full-year inflation last year averaged at 4.1 percent, within the government’s 3-5 percent target for 2014.

On the other hand, consumer prices in Central Visayas in November and December last year rose to 4.9 and 3.9 percent, respectively. The region's full-year average inflation could hover at 3-4.5 percent, the NEDA said.

“The biggest percentage of our income goes to food consumption,” Carreon said in an interview.

“That’s why when prices go down, that will allow households to buy other things. When prices go down coupled with improved production in agriculture which will increase supply, that will result to lower prices of consumer goods,” he added.  (FREEMAN)