The country’s inflation rate jumped to 6.4 percent in July, the fastest pace since October 2018, when inflation rose to 6.9 percent and surpassed 3.7 percent in June this year.
Macro headwinds, including the Ukraine war, rising petroleum prices, supply chain disruptions and high cost of living, added pressure to the prices of goods.
Amid the skyrocketing prices, we would expect belt-tightening from consumers and saving for rainy days.
That was not the case.
A quick look at the earnings report of the biggest conglomerates shows surprising positive performances. From travel and tourism, cars, mining, retail to luxury brands, all enjoy brisk business.
Flag carrier Philippine Air Lines saw its first-half profit soar 258 percent to P6.6 billion, its first profit in six years. The unprecedented rise in coal prices and the mounting global demands pushed Semirara Mining and Power Corporation’s income to jump by 311 percent to P25.8 billion in the same period.
The solid retail activities with the easing of travel restrictions proved a boon to SM Investments Corporation, with its consolidated net income climbing 27 percent to P25.5 billion from January to June.
While Chery Auto Philippines reported a massive 140 percent increase in its total vehicle sales in June compared to the previous month of May, this was Cherry’s highest monthly sales performance since entering the Philippine market in 2019.
Revenge spending
Experts have attributed the Filipino splurging to “revenge spending,” a phenomenon when people tend to alleviate their negative emotions by spending. The strict mobility restrictions to prevent the spread of Covid-19 prevented most of the population from going outdoors and engaging in collective activities.
But the pandemic prevention also resulted in negative emotional impact on many people, including boredom, anger, depression and fear because of the uncertainty when Covid-19 will end.
Domestic economic activities peaked during the Holy Week and spilled even after that. The tourism sector even reported high occupancy rates during weekdays.
Independent surveys even indicated that people are spending unmindful of the price. Airfares are selling at ridiculous prices, higher than pre-pandemic, but people still buy.
Heck, a tourist in Virgin Island, Panglao, Bohol, paid over P26,000 for a seafood fare for 13 pax (50 pax according to the vendor).
Luxury brands are expanding
The people’s desire to relieve themselves of the unexpected stress caused by the pandemic drove them to surge in spending through shopping. Indeed, several retail therapy studies showed evidence that people reduce negative emotions such as anxiety, sadness and depression, by shopping.
In all, people shop to make themselves feel better.
In Glorietta, French luxury brands expanded while new brands are added.
Louis Vuitton, Thom Browne, Dior, Kenzo, Fendi, Univers, Off-White, Rimowa, Max Mara, Patek Philippe, L’Officine Universelle Buly and Bvlgari have expanded their stores.
In the past two months, luxury brands Celine, Jimmy Choo, Loewe and Ermenegildo Zegna, opened shops, while Tiffany & Co. is set to open in October this year.
Moreover, the fifth generation 2022 Range Rover was all sold out and paid for even before they were delivered locally.
The negative emotions elicited by the Covid-19 pandemic tend to make people display changing behaviors concerning consumption. Others may demonstrate the behavior associated with revenge spending and aggresively make discrete purchases to relieve themselves of suppressed adverse emotions, including luxury goods.
Whatever the reason, this revenge spending is helping the economy in the near term but could hurt the country’s total savings.
Data from the Philippine Statistics Authority (PSA) showed that gross savings in 2021 declined 12.4 percent to P3.88 trillion from P4.43 trillion during the height of the pandemic in 2020.
But this is for another discussion.