Holiday buying to pull up prices by yearend

The usual buying sprees that shoppers are prone to during the holiday season are expected to pull prices up in the final quarter of the year, a scenario known as demand-pull inflation.

University of Asia and the Pacific senior economist Cid L. Terosa said the last quarter of the year is usually marked by a higher consumer price index, as the the public goes on an overdrive of shopping for gifts and stockpiling food for holiday feasts.   This surge in demand for goods and services, when unmatched by an increase in supply, usually results in inflationary trends.

“During the Christmas season, we really expect an increase in prices since people have more money with the 13th month pay, and they buy a lot not only for themselves but also for others,” he said, adding that the steepness of the price hike depends on the magnitude of consumer demand.

It is still theoretically possible for prices to remain stable, but only if the supply of goods and services increases with the demand.  However, this seems like an unlikely scenario as people inevitably spend a lot during the holidays and supply is hard pressed to catch up with demand, resulting in jacked-up prices.

However, Philippine Retailers Association vice-president Paul A. Santos said price fluctuations during the holiday season will most probably be observed only in the informal sector where sellers have “no mechanism for absorbing sudden price changes.”

“But for an organized retailer, instead of sensing the opportunity for profit, he’s content with just getting the goods off his racks,” Mr. Santos said, adding that organized retailers usually stay within the Department of Trade and Industry’s (DTI) suggested retail prices for food items.

“In case there is an uptick in the prices, retailers usually absorb this cost instead of passing it on to consumers. This is partly in adherence to the DTI prices, but also because retailers fear that the consumer will buy from their competitors,” he explained.

Food, apparel, and children’s goods are the items that typically sell well during the holiday season, Mr. Santos said.

“Christmas is an important occasion for us and so we want sumptuous food on the table,” said Jimmuel C. Naval, Philippine Studies professor at the University of the Philippines.

He added that holiday consumerism is related to the country’s agricultural characteristics, saying that even before the Spanish occupation and Christianization of the Philippines, farming communities were already celebrating harvest festivals.

 

Adapted from:  Business World, December 23, 2011

Photo: “Shopping At Any Price” by Gideon, c/o Flickr. Some Rights Reserved