Per capita household spending growth slows

GROWTH of household spending slowed to 3.9% in 2018, with nine out of 17 regions posting slower growth rates and one recording a decline, according to data the Philippine Statistics Authority released on Thursday.

Household spending, which accounted for 68.5% of total expenditure, totaled some P6.31 trillion in 2018. This represented a 5.6% year-on-year increase in 2018, albeit slower than the 5.9% growth in 2017.

On a per-person basis, household spending rose 3.9% to P59,162 in 2018 from P56,941. This, however, was slower than the 4.2% growth logged in 2017.

Among the country’s 17 regions, Central Luzon drew the fastest in per capita household spending at 5.3% to P69,926, albeit slower than six percent growth in 2017.

Per-capita household spending growth in the National Capital Region was likewise slower at 3.2% in 2018 from 3.5% in 2017, but remained the highest level of spending among regions at P109,794 per person.

Other regions that posted slower growth rates in household spending were Calabarzon (four percent from 4.8%); Mimaropa Region (5% from 5.1%); Western Visayas (3.9% from 5.3%); Eastern Visayas (3.8% from 4.2%); Northern Mindanao (2.3% from 2.7%); Davao Region (4.9% from 5.5%); and Soccsksargen (3.2% from 3.3%).

On the other hand, seven regions saw acceleration in per capita household spending growth, namely: Cagayan Valley, Bicol Region, Ilocos Region, Central Visayas, Zamboanga Peninsula, Cordillera Administrative Region and Caraga.

Only the Autonomous Region in Muslim Mindanao (ARMM) posted a decline in per capita household spending (-0.4% from 0.2%).

Economists attributed the spending slowdown to elevated inflation last year, which forced households to tighten their belts.

“Household final consumption spending in real terms may have slowed to 5.6%, but this is still a decent number considering difficulties in 2018 on the back of high inflation, which manifests itself clearly if we take a look at per-capita household spending,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail.

Mr. Roces explained that for 2018, the improved household incomes brought by the increase in remittances from overseas Filipino workers, the implementation of the Tax Reform for Acceleration and Inclusion law that slashed personal income tax rates, and “stable employment prospects” were “eroded by high inflation levels, which decreased the purchasing power of households.”

“Discretionary expenditures were restrained due to higher food and transport costs,” Mr. Roces said.

Last year saw inflation picking up for nine straight months, peaking at a nine-year-high 6.7% in September and October before easing to six percent in November and 5.1% in December. This brought the full-year 2018 average to 5.2% against the Bangko Sentral ng Pilipinas’ 2-4% target range for 2018 and was the fastest since 2008’s 8.2%.

Headline inflation has since slowed for six months to a 16-month-low three percent.

In a separate e-mail, Union Bank of the Philippines, Inc. (UnionBank) Chief Economist Ruben Carlo O. Asuncion noted Central Luzon’s acceleration in household spending is consistent with the region being “one of the best performers” last year in terms of economic growth.

Central Luzon was among the 12 regions that recorded overall economic growth above the 6.2% national average in 2018. That year, the region’s economy logged in a 7.1% growth.

“One thing that I see in Central Luzon is the aggressive infrastructure spending and the consequential impact of such development,” UnionBank’s Mr. Asuncion said.

As for ARMM, Mr. Asuncion said: “I think it’s well known how the region is challenged and vulnerable to any type of volatility. I am assuming that this is still an offshoot of the recent armed conflict in the area.”

“With inflation continuing to decline back to the government’s target of 2-4%, UnionBank’s Economic Research Unit sees the improvement in 2019 household spending… [with] inflation settling at 3.2%, well within the government’s goal,” Mr. Asuncion said.

Security Bank’s Mr. Roces was likewise optimistic, saying: “We project that tapering inflation levels will help support higher household spending for this year. With receding inflation, there is upbeat domestic demand.”

“Consumption is coming back. There is excitement once again over higher discretionary expenditures. And with the recent policy rate cuts by the central bank, private investments will continue to sustain jobs and income creation.” — Lourdes O. Pilar