Statistics and Lies: Public Anger over Soaring Food Prices and the August 9- Year High CPI of 6.4%

First, the food or rice crisis has allegedly fanned popular discontent claimed a Senator.

From the Inquirer: Public anger over soaring rice prices shouldn’t be ignored, Sen. Cynthia Villar, chair of the Senate agriculture and food committee, said at the Meet Inquirer Multimedia forum on Tuesday. Asked if she thought officials should be fired to solve the rice supply problem faster, Villar said people’s anger might spur authorities to take action.

Second, today’s CPI announcement from the PSA.

From the Inquirer: Prices of food—especially rice—as well as “sin” products like cigarettes and alcoholic drinks continued their climb in August, such that the inflation rate surged to an over nine-year high of 6.4 percent year-on-year, risking to slow the country’s economic growth. The latest Philippine Statistics Authority (PSA) data released Wednesday showed that the rate of increase in prices of basic goods and services last month jumped at its fastest pace since the 6.6 percent posted in March 2009. Headline inflation in August was also higher than estimates of government and private sector economists, who had projected the rate to fall within the range of 5.5 percent and 6.2 percent at most.

Witness the avalanche of articles covering inflation and food crisis in just stunning 3 days!

 
September 5

Inflation hit new over 9-year high of 6.4% in August

Workers find ways to scrimp in the face of rising prices

Palace Gov’t taking steps to address inflation

Economic managers pressure Piñol to curb soaring inflation

Diokno says gov’t urgently needs to tame inflation

Arroyo on 6.4% inflation I’ve had a more alarming situation as President

Some lawmakers want Duterte economic managers fired

Gatchalian 6.4% inflation rate cause for alarm

6.4% August inflation ‘self-inflicted’; gov’t ‘did little or nothing’ — Salceda

NFA council approves additional importation of rice

‘Bukbok’ rice given to Bohol town residents replaced

Pangasinan, Ecija farmers oppose onion importation

Villar Public anger to force admin action on agriculture execs

‘NFA can keep 60-day buffer stock only through rice importation’

September 4

‘Eat tilapia if you can’t have galunggong’ — Cynthia Villar

Cynthia Villar No rice shortage in PH; it’s all with traders

NFA chief admits fund diversion for debt payment

Employees in red oppose calls to abolish NFA during flag ceremony

Benguet under state of calamity as rains destroy crops

Bohol folk say no to ‘bukbok’ rice

Rice crisis Time to stop talking and take action

Diesel, gasoline pump prices rise for 4th week

September 3

Farmers to gov’t Help us, we’ll give rice

DA chief sees nothing irregular in rice infested with weevils

Piñol Reliance of Zambasulta area on smuggled rice caused shortage

No to NFA abolition – aggie chief Piñol

NFA cannot compete with private rice traders, says farmer sector rep

Palace blames opposition, ‘spin doctors’ for creating rice shortage scare

Robredo calls for appointment of competent, trustworthy NFA head

Raiding rice hoarders’ warehouses a band-aid solution – Drilon

DA chief echoes Duterte’s statement No rice shortage in PH

Duterte assures public There’s ‘plenty of rice’

BOC chief Smuggling won’t solve rice woes

Rice crisis blamed on hoarding, corruption, poor agri infrastructure

Inflation likely hit 9-year high in August

At the very least 35 articles in all!

 

Figure 1

The 6.4% figure comes from the recalculated base year of 2012. Because the previous base year (2006) had been about 60 bps more than 2012, then CPI would be about 7% if the old CPI base applies. The PSA discontinued the calculation for CPI with the base year of 2006 last June. (figure 1 lower window)

Neither 6.4% nor 7% signifies as realistic CPI numbers.

And do notice too of the shifting narrative. Previously, it had mostly been about oil. Today, with oil price steady, food has been attributed as the prime culprit. (figure 1, upper window) But do notice that the non-food and energy component or the CORE inflation has also been rocketing. While it may be true that parts of the headline inflation affect the core inflation, surging core inflation epitomizes broad economy inflation.

But as I previously pointed out, STREET inflation is markedly different from STATISTICAL inflation!

Let me rephrase the article covering the comment of the politician from “Public anger over soaring rice prices shouldn’t be ignored” to “Public anger over soaring CPI of 6.4% shouldn’t be ignored”.

Will the public be incensed by only 6.4% inflation?

The Philippines has had many above 6.4% inflation rates before.

 

Figure 2

Were these episodes enough to strike a chord or rouse the masses to public anger?

The house speaker may be right in “saying she experienced “a more alarming” situation during her term as President.”

Except that what she attributes as fixing the inflation then “by massive importation of rice and massive buying of rice from local farmers” was hardly the reality.

 

Figure 3

Back then world oil prices hit a record $147 in July 2008, and there was a world food crisis in 2007-2008.

The BSP’s rates cuts combined with external forces combusted domestic CPI ‘inflation’. The global food crisis exacerbated domestic conditions which exploded food inflation to almost twice the rate of August 2018 inflation.

I was an analyst (very bullish) then and don’t recall such intense backlash from the public. Perhaps the internet wasn’t as pervasive.

And nope, the former President’s actions hardly solved the inflation problem here.

It was the Great Recession, the housing bubble that imploded and climaxed with the Lehman bankruptcy that rippled across the globe, that did.

The inflationary boom scenario switched to a deflationary bust.

Has 6.4% CPI today been enough to stir “public anger”? Has people’s tolerance level fallen to become highly sensitive to inflation? Why? Has there not been sufficient jobs and income growth to offset these? The Governmentsays there is.

Or has the current inflation been far, far, far higher than those experienced in 2007-2008 to spark a backlash?

British Prime Minister Benjamin Disraeli was right: "There are three kinds of lies: lies, damned lies, and statistics."

The first rule of the Inflation Club is: You do not talk about the BSP’s contribution. The second rule of the Inflation Club is: Remember the First rule.