May 14, 2008

That bee is gonna sting

Sign of the times: Jollibee hiking
prices on soaring costs

By Dennis Estopace
Reporter, BusinessMirror
May 14, 2008

NOW you know times are really hard. The iconic fast food that offers “distinctly Filipino” spaghetti and fried chicken has been bitten by the inflation bug.

Jollibee Foods Corp., the country’s largest fastfood operator, would be hiking prices “any time soon,” chief executive Tony Tan Caktiong told the BusinessMirror.

However, Tan Caktiong said he doesn’t expect such increase to impact sales. (Read on at Jollibee.)

OH crap, now we're in real trouble! Various economists from different banks are already projecting a 9% inflation rate this year. With this announcement from Jollibee, that makes the inflation projection even more credible. After all, about 50 percent the consumer price index (which is the basis of the inflation rate) is composed of food, beverages and tobacco items.

Jollibee's products have become an index of sorts for the country in terms of food prices. Its burgers, spaghetti, and fries are standard fare especially for the lower middle income market. (I personally like the nacho fries.) These are the clerks, the sales ladies, tellers, patrolling cops, and janitors, etc. who comprise the bulk the of country's working force.

These folks don't even earn enough to pay for all their needs, an uptick in food prices will just burden them further. (What's more, transport groups are agitating for higher fares.) With Jollibee raising its prices, I am pretty sure other food staples like canned sardines and instant noodles will soon follow. It's bad enough we have a rice crisis and surging electric bills.

I can't imagine how we Pinoys can take more of this.

* * * *

ON the other hand, a higher inflation rate spells good news to depositors as this usually means, the Bangko Sentral ng Pilipinas (central bank) will need to increase its overnight rates to sop up the extra liquidity in the market.

This also means the rate on government securities like Treasury Bills and Bonds will go up. Depositors will be sure to check with their banker the latest rates for special deposit accounts and investment instruments.

Already I got a call from my bank which is offering 8.5% interest per annum on its Tier 2 notes. (Earlier this year, the notes were only offered at 7%.) Of course, the catch is, you have to hold on to this basically unsecured debt for 5 years and the interest is paid out every six months. But it's a good deal especially if it's a strong solid bank. Also try to look ask your bank if it offers 5-year tax-free accounts. These special accounts normally accept deposits as low as P50,000. Interest is paid every month but like the Tier 2 notes, you must keep your money in the account for five years.

And btw, just in case you've bought into the whole economic miracle that is RP crap promoted by the presidentita, a high inflation rate is one of the signs the economy is heading for the dumps.

1 comment:

Anonymous said...

Stella, I try to follow your blog wherever I am. Presently I am in Argentina and got a kick out of your "bee sting" story ~ inflation. Let me tell you in Argentina the inflation rate is closer to 25% last year and rising. It is closer to the dollar in exchange rate than the Phils. Peso is but nevertheless inflation in any other language still spells the same. Just wanted to drop my 2cents into this equation and keep things in proper perspective. Thank you for the very informative and entertaining posts.