6.07.2019

The PHP has moved up vs the USD this week


Presently, the PHP to USD rate sits at 51.71. The PHP to USD rate had reached 52.70 as recently as May 16.
 

Light crude closed at $53.18 on Thursday coming off its recent peak of $65.30 on April 24 (an 18.5% drop).

Although the fall in oil prices has a negative effect on the PHP to USD rate, the lower oil prices should have a positive impact on inflation (if oil prices were all that we needed to consider).

The oil price cannot be relied up as an absolute determinant in the PHP to USD exchange rate. In September 2013 the oil price was over $100, but the Piso traded at 43 to the USD. There are many other factors that affect the rate and the effect of oil is relative to those.

In the last 18 months I have noticed increases in the price of many goods. For instance, sugar added items like Nestea liter packs have almost doubled from (the packs went 11PHP to 18PHP); adobo cut pork has increased from 210PHP to 250PHP; a gallon of coconut oil has increased from 410PHP to 460PHP. We were paying approximately 10PHP per kWh for electricity just over a year ago and now it is 12PHP. In the same time regular gasoline has gone from around 43PHP to 60PHP.
Many blame the price increases on the Train law and fuel taxes.

I am not in the market for a new car, but I do casually notice that auto prices have increased. Isuzu seems to have eliminated the Crosswind due to the vehicle line not meeting Euro-4 Emission Standards. Sad for me, as I wanted the plain white Crosswind XS that was priced @ ~800k. The 2.5-liter diesel had been considered by many to be bulletproof and I was looking forward to buying a new one someday. I have no doubt that there will be many good used Crosswinds on the market for years to come, but I have my heart set on a new vehicle. I will most likely purchase a pickup when the time comes, as I need the toughness due to weather and road conditions and the sheer utility of a working vehicle. Everything a car can do a pickup truck can do better and for longer (IMHO).

There can be no doubt that TRAIN took a toll on auto prices:





Still, for the expat, things balance out. When prices were lower the exchange rate was also lower. The 52PHP to the USD rate puts us roughly a full 33% higher than it was just a few short years ago when the rate went below 40PHP. Now may actually be a good time to build a house. When we began building, the price of cement was about 220PHP. By 2015 the price has gone up to 300PHP and now it is around 250PHP. Labor has increased though, and that will be one of your major cost drivers. I would estimate that labor may have increased as much as 40% or more in ten years on the whole. This is due to increased demand as more foreigners and prospering OFWs are competing for limited construction labor. Cement and labor were 10% and 15% (respectively) of our total building cost.

Also on the plus side is the fact that consumer electronics prices are either steady or falling. Computers, smart phones, televisions and appliances are becoming more advanced with greater capabilities, but prices are steady. Also, my Internet price has stayed the same for years, but performance and reliability has increased by multiples. COOP cable price also remains steady at 400PHP per month for two connections. The cable service provides 70 channels of which I deleted 37. It's still very good for the price.



Two years ago I purchased a Honda GX35 four-stroke brush cutter for 15,000PHP. I just purchased the same model from the same shop and this time it was 12,000PHP. 


Eight years ago I paid 9,000PHP for a 1/2 horsepower Carrier air conditioner. Just last year I picked up a Sharp 1/2 horsepower unit for 7,000 PHP.
 
So you never can tell which way prices will go on some items. Generally speaking, cars, food and fuel only go up-up-up.  LPG fluctuates. We were paying less six months ago than we had in years and now it is almost at an all time high.

All of the price increases are somewhat softened by the fact that the USD is running so high these days. The highest I have ever seen it was 56 PHP to the dollar and that was 2004.

Some have predicted that the PHP to USD rate would go to 54 or even 56 by the end of this year. The forecasts can probably all be sourced to speculators and manipulators.

We shall see. 


Update 12-23-2019


Exchange rate is at P50.90 to the dollar right now and it never made it to 54 this year. To my knowledge, it never even made it to 53.

 

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