Encouraging indicators

My regular readers would know that I like to assess the state of our economy via the PiTiK test, my mnemonic for presyo (prices), trabaho (jobs) and kita (income). Of the three, the first is the one most frequently monitored by the government (monthly). The other two are measured every quarter, and the last jobs data were for January 2012, while the last income/output data were for the end of 2011. While the first quarter of 2012 is behind us, the corresponding growth data won’t be out for another month.

So how are we doing lately on the PiTiK test?  Based on the latest numbers, price increases have slowed down, which is good news so far. From an average annual increase of 4.4 percent last year, prices last March rose by just 2.6 percent over March 2011. What’s even better news is that food prices only rose 1.4 percent. The average for the first three months of the year so far is 3.1 percent (2 percent for food), showing that (1) we’re doing generally better than last year, and (2) price increases have so far been on a slowing trend.

Will this slowdown hold? Let’s see. The main things that drive prices are oil prices, the foreign exchange rate, wage rates, and agricultural production especially natural calamities that disrupt food supplies. Actions by the Bangko Sentral ng Pilipinas (BSP) on the supply of money in circulation (that is, monetary policy) also influence movements in overall prices. While oil prices went up in past weeks, they are now on a downtrend with the approach of the summer months in the big countries where winter heating requirements are the major driver of seasonal oil price movements. The peso has been steady lately, and I see no drastic movements in the near future. The current wage adjustments may lead to some uptick in prices, but one can expect this to be minimal given the wage rate adjustments that have been coming in—indeed to the dissatisfaction of many in the labor sector. There is no El Niño drought this year, so any disruptions in farm production would be isolated. And BSP has been doing such an exemplary job on monetary policy lately that it would be the last reason I would expect for price increases to pick up.

What about jobs? The last two quarters’ data have in fact been quite positive. As of the January 2012 survey, our economy had generated more than a million new jobs over the preceding year—227,000 of them coming from agriculture. (Note that an average of 1 million new workers join the labor force every year.) The corresponding numbers last year were only 292,000 total new jobs, with 152,000 coming from agriculture, telling us that there has been a dramatic improvement over the past year. Last October’s data were even more encouraging: over 2 million jobs were generated between October 2010 and October 2011, with agriculture contributing almost 600,000. (Note that the October and January data are not directly comparable due to seasonality.) It is also welcome news that the underemployment rate—measuring those workers who indicate that they are not working enough—has declined from 19.4 to 18.8 percent, suggesting that there has been some improvement in job quality as well.

On the last indicator (kita or incomes, equivalent to value of output or total production), it’s still the 2011 slowdown of GDP growth to 3.7 percent (from 7.3 percent in 2010) that remains the latest news. While that was unwelcome news when it came, I must disabuse the notion of some careless observers (particularly those not fond of our current leaders) that the lower GDP growth rate meant that the economy went down, or that overall income and output fell. It did not. People tend to be confused between growth rates and actual levels. The economy continued to grow, and at a comfortable margin over the rate of our population growth (around 2 percent). So as President Fidel Ramos used to say, the bibingka grew by more than the number of people who must share it. Still, there remains the challenge of slicing that bibingka more equitably so that everyone can indeed have a bigger piece. President Aquino, his Cabinet and our lawmakers have much homework to do on this. To be fair, however, all of us have a role to play in pursuing a more broad-based and inclusive growth of our economy, so that the rising tide will lift all boats, as they say.

Beyond PiTiK, I see more encouraging data in the latest reports. I have been welcoming how private domestic investment has made a clear break from the past decade’s sluggishness, overshadowing the decline in foreign direct investments (FDI) induced by economic difficulties overseas. But now even FDI is poised to rebound with a vengeance; the data show a record increase in FDI approvals not seen since 1996. Another casual indicator is the 11.6-percent rise in industrial electrical consumption, reversing a 1.3-percent drop last year—suggesting that industrial activity has picked up. But what particularly encourages me is the hefty 26.6-percent jump in tax revenues in February. Even after netting out the lumpy P4.9 billion in tax collections from the Peace Bonds booked in February, the jump was still an impressive 19.9 percent. It seems that the Bureau of Internal Revenue’s Run After Tax Evaders program is finally bearing fruit. And as we all know, higher revenue collection means more funds to provide for basic needs and propel further economic growth.

My PiTiK test yields two out of three items as good news—and with the above and more bits of good news space constraints keep me from mentioning, the third appears to be looking up as well. Encouraging indicators indeed.

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E-mail: cielito.habito@gmail.com