THE CPI MARKET BASKET : The CPI Market Basket is defined in investopedia.

com , as a subset of products or securities that is designed to imitate the performance of an overall market. This tracks a variety of consumer goods and provides an estimate for inflation, prices or performance level. The market goods in the CPI basket is a relatively fixed set of consumer products and services valued and used on an annual basis to track inflation. It is often adjusted periodically ,that is yearly to account for changes in consumer habits. It is used primarily to calculate the Consumer Price Index(CPI). The CPI compares the value of the basket each year and determines the level of inflation for that period. Take a look at Illustration 1 , in which the market basket is divided into parts. The picture is a CPI market for the US in which contains everyday products in which large portion is housing, followed by transportation and then food and beverages. Others parts are education, medical care, recreation, apparel and other goods and services. As the product in the basket increase or decrease in price, the overall value of the basket changes.

Illustration 1 : CPI Market Basket in the US.

The CPI market basket of the Philippines (Illustration 2) ,as compared to US, the large piece of the pie is the food for both the bottom and upper income group. This means that food is given more priority in a Filipino family other than any expenses. The second largest piece would be categorized as others . This includes medicare and household expenses. Third is housing and the others are little pieces of the pie which are transportation and fuel and light.

Illustration 2 : CPI Market Basket in the Philippines for Year 2006 According to 2006 Family Income and Expenditure Survey (FIES) , in year 2006, it was seen that there is a shift of expenditure as compared to year 2003. From prioritizing food , it was seen that there was less spending that happened in that group. From 59.1% in 2006, it decreased as compared to 60.2% in 2003 for the 30% lower income bracket. Same as in the 70% upper income group, it decreased by 1.8% from 41.1% of 2003 to 39.3% of 2006. Housing showed an increase from 8.8% in 2003 to 9% in 2006. Other expenditure like medicare and household expenses increased in the bottom 30% income group. From 1.4% to 1.7%, transportation and communication from 3.2% to 3.8% , Fuel, light and water from 6.6% to 7.3%.

Another good in the market basket, is food. The most basic food commodity in a Filipino basket is the rice. Rice is considered as the staple food of the Filipinos. Ordinary rice was consumed by approximately 15 million families at an average of 463kg per family per year or 8.9 kg per family per week. See illustration 3. Ordinary rice varieties are in the like of C-4, Intan, Macan and IR-8. For special rice varieties,the consumption is about 4.1 families consuming it. This is about 329 kg per family annually or about 6.3 kg per family per week. Special rice varieties are those special milled rice like Wag-wag, milagrosa, Sinandomeng and dinorado. For the NFA variety, the consumption was 255 kg per family per year or 4.9 kg per week.

Illiustration 3 : Average Annual Rice Consumption of Filipino Families

Base on the data on 2006 FIES, total housing expenditures increased by 21.3 percent. In 2006, the expenditure for housing is approximately P340 billion as compared to P280.8 Billion in 2003. The breakdown was 12.7% went to rent/rental value and about 0.5% went on house maintenance and minor repairs. NCR and CAR were reported as the highest proportion in

housing expenditure to total family expenditures. See Illustration 4 .

Illustration 4 : percent of Total Housing Expenditure to Total Family Expenditure : 2006 and 2003. For a typical Filipino, it is imperative to have an education. It is the primary way to uplift ones status . Being educated brings about opportunities to help support oneself and the rest of the family. Families allocate hard earned money for the proper education of their children. Using the 2003 FIES data, the total family expenditures for education was estimated at about P82.2 billion, which increased from P75.7 billion of the year 2000. As illustrated in Illustration 5, the largest share of the education expenditure was spent for education fees such as matriculation and tuition fees(70.4%), followed by allowance by family members studying away from home(17%). Other expenditures were allocated to purchase of books(4.5%), school supplies (7.2)and other educational expenses(1%).

From the reports of the National Education Expenditure Accounts of 1991-1998, the Philippines was ranked as second in Southeast Asia in terms of government budget in education. The Philippines registered a 3.8 % share in 1997. The other Asian countries which recorded highest in education allocation in government are Malaysia, Thailand and Bhutan.

REFERENCES : 1. 2006 Family Income and Expenditure ; http://www.census.gov.ph/data/sectordata/dataincome.html; 1/2/11@3PM 2. 1991-1998 National Education Expenditure Account ; http://www.hscb.gov.ph/stats/nexa/an_govtAsia.asp; 1/3/11 @ 11:30AM