Numerous barometers are utilized to track inflation, with some notable ones including the Consumer Price Index (“CPI”), Core Inflation, and Personal Consumption Price Index. Each of these measures focuses on a distinct basket of goods and services.

The plethora of inflation measurement methods can be confusing for investors. 

However, one overlooked index provides an insightful perspective on inflation, as it is specifically tailored to assess critical components of the Philippine economy.

Philippine Markets Daily: 
The Monday Macro Report
Powered by Valens Research

CPI, commonly known as “Headline Inflation,” measures the overall change in consumer prices based on a basket of goods and services while Core Inflation is CPI excluding volatile components such as Food and Oil. 

These measurements focus on the common prices that consumers pay. Both are suitable gauges for inflation. 

However, if we want to be specific and want to obtain some understanding of a particular economic force, we use a different index or quantification with a specific weighting. 

One of them is the General Retail Price Index (“GRPI”). The GRPI primarily focuses on tracking commodity products, including food, fuel, manufactured goods, machinery, and other small items like clothing and furniture. 

Unlike CPI, where the index derives its figure by a weighted average of the change in the price of goods and services, the GRPI has its own weighting that focuses on commodities significant to the Philippine economy. 

In the latest release by the Philippine Statistics Authority, the top three weighted commodity groups in the GRPI are as follows: Food (37.5%), Machinery & Transport Equipment (24.1%), and Manufactured Goods (16.0%). 

Food holds a significant weight in this index due to its role as a non-discretionary and relatively non-elastic essential for consumers. Within this category, there are specific sub-components highly sought after in the Filipino cuisine, including fish, vegetables, and canned foods. 

Consequently, any upward or downward movement in this component is of paramount importance because it can have a direct impact on consumer spending patterns.

The next heavily weighted category is Machinery and Transport Equipment. In 2021, integrated circuits, office machine parts, and semiconductor combined contributed to more than 30% in Philippine export value. 

As such, the GRPI offers insights into not only the consumers and business of the Philippines but also global trends. A reason for this is because these products rely on materials imported from international markets during their production processes and the Philippines exports them to different regional markets. 

Lastly, manufactured goods are heavily weighted because of their relationship to construction. We’ve briefly mentioned the significance of the construction industry to the Philippine economy in our previous report–it employs thousands of workers and is a driver of long-run economic growth.

Now, let us see what the GRPI is telling us…