Inflation drop gives consumers a breather

CEBU, Philippines — The news saying that inflation continues to slow down is generally a sigh of relief -- at least for consumers.

But is the inflation downtrend actually giving consumption activity a boost?

According to Cebuano retail businessman Robert Go, slowing price growth doesn't necessarily mean consumption will automatically increase.

"Consumption will not grow automatically because we have to consider the incomes (of the consumers) but we are seeing the light that we will not suffer some more as price growth slowed down," the Philippine Retailers Association-Cebu president told The FREEMAN in a phone interview.

Go said cooling inflation means that growth of prices is at a slower pace.

He said consumers nowadays are challenged with having to allot a bigger budget to buy the same volume of goods they used to shopped before.

"Today we need more money to buy the same basket of goods we used to buy a year ago or even more money to buy same number of goods compared to two years ago," said Go, who owns a supermarket chain that targets the mass market.

Inflation last month slowed down further to a 16-month low at 3% from 3.3% in March, reeling from last year when consumer price growth hit a decade-high.

"With the lowering of inflation to 3% that meas prices will lessen their increase in percentage but there's still an increase. We are at least breathing a sigh of relief," retail entrepreneur explained.

But with the rising costs of living in general, Go pointed out that incomes of consumers have to catch up as some struggle to make ends meet.

Go believes the slowing inflation is "a good sign" the economy is getting better, saying a high inflation cripples poor consumers.

"The poor consumers had suffered a lot during the very high inflation growth last year when food prices became excessively high. Some non-basic foods had reach more than 20-30% increase overall in a span of one year or two and had affected the capacity of many poor to buy," the businessman said.

If inflation further continues to cool down moving forward, consumption will gradually pick up that if consumer sentiment improves.

"We should see the effect of lower inflation in a few more months in terms of consumption," he said, citing the economic expansion should also prop up buying activity.

However, risks remain on the horizon.

The El Niño dry spell, possible increase in utility rates, and volatility in global oil prices threaten to push up inflation.

Meanwhile, the Department of Trade and Industry announced some goods increased in prices.

For canned sardines, its major raw material, tamban fish, now sells at P32 to P34 per kilo. Prices of wheat flour, carton, wrappers, and seasoning have also increased and affected the prices of instant noodles. Raw and imported vinegar, and fish extract pushed up the prices of condiments while warehousing and logistics affected cost of toilet soap.

Commodities such as processed milk, coffee refill, coffee 3-in-1, bread, detergent/laundry soap, candles, canned meat, and batteries all retained their previous suggested retail prices, DTI said.

Trade chief Ramon Lopez reiterated in a statement that prices are set by companies, not by the government, with the country being under a free trade enterprise.