The Cost of Living and the Welfare

of the Society: Part 2

Lecture series in Basic Macroeconomics

Prepared by Elizabeth R. Bajit, Ph.D
CBAA, CLSU
 In Part 2 we discuss the:

 General Retail Price Index

 General Wholesale Price Index

 How the information on prices and inflation are used by the

government

 How the price changes affect the welfare of the society

 General Retail Price Indices (GRPI)

 measure of the changes in the prices at which retailers

dispose of their goods to consumers or end users
relative to the base year.
 It is an indicator of the economic activities in the retail
trade sector.
 Based on a basket of goods commonly traded in the
retail market. The 2000 based GRPI consists of 500
commodities.
 The
establishments
included in the
survey for
General Retail
Price Index are
those within
Metro Manila or
the National
Capital Region

Source: Philippine Statistics Authority

 General Wholesaler Price Index
 The general wholesale price index (GWPI) is an
indicator used to measure the changes in the price levels
of commodities that flow into the wholesale trade
intermediaries.

 Based on a basket of variety of commodities which

are traded at the wholesale market.

 The wholesaler price is the sum of the producer prices,

wholesaler trade margin, tax mark ups and distribution
cost of the wholesaler.

 It is primarily used by government for policy formulation

 General Wholesaler Price Index

Coverage of the survey on GWPI

a) National Capital region represents Luzon
b) Cebu represents the Visayas
c) Davao represents Mindanao

The 1998 based GWPI covers the following:

a) 437 commodities in Luzon
b) 302 commodities in the Visayas
c) 372 commodities in Mindanao
 How the Prices and Inflation
Affect the Welfare of the Society
 Nominal versus Real GNI for Philippines

Year GNI (current US$) GNI (constant 2010 US$)

2000 91558584984 1.42659E+11 How to interpret the values?
2001 86478311590 1.47034E+11
2002 92344832930 1.52369E+11  Reference or base year is 2010
2003 95230466641 1.59936E+11
2004 1.03864E+11 1.70094E+11  Nominal GNI is the GNI at current US$
2005 1.17904E+11 1.79218E+11
2006 1.39394E+11 1.87822E+11  Real GNI is the GNI at constant 2010 US$
2007 1.69989E+11 1.9963E+11
2008 1.97963E+11 2.08874E+11  In 2010, nominal GNI = real GNI
2009 1.96472E+11 2.16428E+11
2010 2.31747E+11 2.31747E+11  During inflationary period (that is
2011 2.59496E+11 2.39156E+11
comparing 2011… 2020 with 2010), the
2012 2.90824E+11 2.56265E+11
real GNI < nominal GNI because we can
2013 3.17288E+11 2.75541E+11
2014 3.31766E+11 2.92527E+11
buy less if the prices are higher
2015 3.41467E+11 3.107E+11
2016 3.54012E+11 3.3171E+11
 During deflationary period (that is
2017 3.64719E+11 3.54324E+11 comparing 2000… 2009 with 2010, the
2018 3.83817E+11 3.75152E+11 real GNI > nominal GNI because we can
2019 4.14552E+11 3.95503E+11 buy more if the prices are lower
2020 3.89324E+11 3.50416E+11
 Nominal versus Real GDP for Philippines
How to interpret the values?
GDP per capita GDP per capita
Year (current US$) (constant 2010 US$)  Reference or base year is 2010
2000 1072.809037 1668.715543
2001 990.5640487 1683.314699  Nominal GDP per capita or per person is the
2002 1036.158331 1709.556987
GDP per capita at current US$
2003 1048.008205 1760.034931
2004 1121.490006 1838.931605
 Real GDP per capita or per person is the GDP
2005 1244.348741 1893.701809
2006 1452.438089 1958.924204 per capita at constant 2010 US$
2007 1744.639979 2051.231465
2008 1991.229749 2105.111227  In 2010, nominal GDP = real GDP
2009 1905.895236 2100.654727
2010 2217.472153 2217.472153  During inflationary period (that is comparing
2011 2450.735694 2264.392242 2011… 2020 with 2010), the real GDP per
2012 2694.305109 2379.66627 capita< nominal GDP per capita because we
2013 2871.429701 2497.68379 can buy less if the prices are higher
2014 2959.645435 2612.854832
2015 3001.043182 2735.185521  During deflationary period (that is comparing
2016 3073.654686 2886.898395
2000… 2009 with 2010, the real GDP per
2017 3123.245642 3042.694287
capita > nominal GDP per capita because we
2018 3252.110274 3190.791611
2019 3485.340844 3340.13267
can buy more if the prices are lower
2020 3298.829851 2980.015814
 Gross national expenditure Gross national expenditure
Year (current US$) (constant 2010 US$)
2000 82385864634 1.3101E+11 How to interpret the values?
2001 80964650768 1.38993E+11
2002 87539164973 1.45236E+11
 Reference or base year is 2010
2003 89619515120 1.51272E+11
 Nominal GNE is the GNE at current
2004 98300121626 1.5972E+11
2005 1.08908E+11 1.64012E+11
US$
2006 1.25559E+11 1.68001E+11
 Real GNIE is the GNE at constant 2010
2007 1.52263E+11 1.77366E+11
US$
2008 1.82758E+11 1.89865E+11
2009 1.7692E+11 1.93277E+11  In 2010, nominal GNE = real GNE
2010 2.09108E+11 2.09108E+11
2011 2.40271E+11 2.16494E+11  During inflationary period (that is
2012 2.69537E+11 2.32531E+11 comparing 2011… 2020 with previous
2013 2.93754E+11 2.51367E+11 year 2010), the real GNE < nominal
2014 3.05691E+11 2.66631E+11 GNE because we can buy less if the
2015 3.20927E+11 2.88123E+11 prices are higher
2016 3.45487E+11 3.18056E+11
2017 3.58254E+11 3.4098E+11  During deflationary period (that is
2018 3.87548E+11 3.67957E+11 comparing 2000… 2009 with 2010,
2019 4.22328E+11 3.8855E+11 the real GNE > nominal GNE because
2020 3.89681E+11 3.39555E+11 we can buy more if the prices are
 GDP Deflator versus the CPI

Consumer Price Index (CPI) GDP Deflator

measures prices of measures prices of all
commodities bought by goods and services, those
the consumers. bought by the consumers,
the business sector and
Includes prices of the government
imported items
Reflects only the prices of
domestic goods
Which between core and head inflation is used in adjusting wages?

 The Regional Wage Board uses the headline inflation because it

is more inclusive.

 The idea of wage adjustment is to help the workers cover the

cost of living. Consumers spend on food and energy items
whose prices are highly volatile

 Core inflation excludes food and energy while head inflation

includes them, so the wage adjustment should be based on
head inflation
 Conclusion

When prices are higher, the purchasing power of the

Philippine peso is lower, meaning we can buy less goods with
the given income.
Inflation reduces the welfare of the Filipinos.
Now you know how to read Economic Reports 📰
 References
1. Philippine Statistics Authority. Core inflation March 2020. Available at
https://www.bsp.gov.ph/Media_and_Research/Primers%20Faqs/inflation.pdf

2. Philippine Statistics Authority. Philippine Inflation Rate July 20, 2021

(2012=100).Available at https://psa.gov.ph/price-indices/cpi-ir

3. Philippine Statistics Authority. General Retail Price Index Primer. Available at

https://psa.gov.ph/sites/default/files/Retail%20Price%20Index%20Primer_Updated.pdf

4. Philippine Statistics Authority. Primer on /General Wholesaler Price Index.

Available at

https://psa.gov.ph/sites/default/files/Wholesale%20Price%20Index%20Primer_3.pdf