What is cost-push inflation, and how does it impact consumers and producers in the Philippines?
Answer (1)
Cost-push inflation happens when the cost of producing goods and services increases, and businesses respond by raising their prices. This type of inflation is caused by higher prices for raw materials, wages, fuel, or electricity—things that producers need to make and sell their products.Causes of InflationIn the Philippines, one common cause of cost-push inflation is a spike in oil prices. For example, when the price of imported crude oil increases globally, gasoline, diesel, and electricity bills go up too. Since transport is more expensive, delivery costs rise, and businesses—from market vendors to supermarkets—have to raise their prices to cover these extra costs. This leads to more expensive food, clothes, and other basic needs for Filipino families.Wage increases can also cause cost-push inflation. Suppose the minimum wage is raised in Metro Manila to help workers cope with inflation. While that helps employees, businesses may respond by increasing the prices of their products to afford the higher payroll. This creates a cycle: higher wages lead to higher prices, and those higher prices may lead to demands for even higher wages.Natural disasters are another cause. If a typhoon destroys rice or vegetable farms in Central Luzon, the supply of food drops. Farmers have fewer products to sell, and they raise their prices to recover losses. Consumers now pay more even for basic goods like rice and vegetables.This kind of inflation hurts both consumers and producers. Consumers struggle with higher costs of living, while small businesses risk losing customers who cannot afford price increases. Sometimes, firms may lay off workers to control costs, increasing unemployment.In short, cost-push inflation leads to rising prices not because people are spending more, but because producing goods has become more expensive. It’s especially harmful when it reduces supply, increases unemployment, and worsens poverty. That’s why governments monitor fuel, wage, and production costs closely.
