INFLATION DEFINITION:- Inflation is when the prices of most goods and servicescontinue to creep upward. When this happens, your standardof living falls. Thats because each dollar buys less, so youhave to spend more to get the same goods and services.If inflation is mild, it can actually spur further economicgrowth. If prices rise slowly and gradually, it can encouragepeople to buy now and avoid future price increases. Thisincreases demand, driving further economic growth. In thisway, a healthy economy can usually sustain a 2% inflationrate.
CAUSES OF INFLATION:There are three causes of inflation:• The first cause is called demand-pull inflation. This occurswhen demand for a good or service rises, but supply staysthe same. Buyers become willing to pay more to satisfy theirdemand. Demand-pull inflation can be accompaniedby irrational exuberance.
• The second cause is cost-push inflation. It starts when thesupply of goods or services is restricted for some reason,while demand stays the same. When the supply of labor is notenough to meet demand, it can create wage inflation. In thepast, inflation in prices generally led to wage inflation, so thatcompanies could retain good workers. However, competitionfrom technological alternatives (such as robotics) and lower-income countries means that wages havent kept up withprices. Higher prices combined with stagnant wages meansyour standard of living has decreased.• The third cause is overexpansion of the money supply.Thats when a glut of capital in the market chases too fewopportunities. Its often a result of expansive fiscal ormonetary policy, creating too much liquidity in the form ofdollars or credit.
Inflation rose slightly to 3.0 percent in January from 2.9percent in December last year of 2012.The slightly higher inflation outturn was also at the lowend of the Government’s inflation target range of 3-5percent for 2013. Likewise, core inflation, which excludescertain food and energy items to measure generalizedprice pressures, increased to 3.6 percent from 3.3percent in the previous month. Month-on-month headlineinflation was higher at 0.5 percent from -0.1 percent inDecember.
The slightly higher headline inflation rate for January wastraced mainly to higher food, electricity, and alcoholicbeverages and tobacco prices. Tight domestic supplyconditions, triggered by the recent weather-relatedproduction disruptions, led to higher prices of food,particularly fish, meat, and fruits. Likewise, the upwardadjustment in electricity charges as a result of scheduledoutages of some natural gas and coal-fired power plantscontributed to the rise in inflation. The Sin Tax Reform Act of2012, which became effective during the month, also pushedalcoholic beverages and tobacco inflation higher.
Inflation Rate in Philippines is reported by the The NationalStatistics Office (NSO). Historically, from 1958 until 2013,Philippines Inflation Rate averaged 9.04 Percent reaching an alltime high of 62.80 Percent in September of 1984 and a recordlow of -2.10 Percent in January of 1959. In Philippines, themost 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) andtransport (8 percent). The index also includes health (3percent), education (3 percent), clothing and footwear (3percent), communication (2 percent) and recreation and culture(2 percent). Alcoholic beverages, tobacco, furnishing,household equipment, restaurants and other goods andservices account for the remaining 15 percent.