Housing to get heavier weighting in inflation basket

Posted On Tuesday, 06 November 2012 16:18 Published by eProp@News
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HOUSING costs will carry a significantly larger weighting in a revamped measure for consumer inflation that takes effect at the start of next year, Statistics South Africa said on Tuesday.

The existing consumer price index (CPI) is monitored by the Reserve Bank when it makes decisions on interest rates. It rose 5.5% in September, up from 5% in the previous month and nearing the top of its official 3%-6% target range.

The contribution of housing costs to the CPI will rise to 22.8% from 21%, largely due to double-digit increases in electricity prices, Stats SA said.

The weighting of food and nonalcoholic beverages will fall to 17.5% from 18.3% at present.

Transport costs will carry a weight of 15.4%, down from 17.8%, reflecting a reduction in the importance given to purchases of motor vehicles.

The calculations are based primarily on the outcome of the Income and Expenditure Survey for 2010-11, released by Stats SA at the same time, but are supplemented by data from retailers.

They showed there had been a substantial shift in spending away from goods to services.

This means that goods will account for just 49% of the weight of the overall CPI, compared with 54% now, while services will make up 51% of the weight, compared with 46% at present.

The number of items in the CPI basket will be reduced to 393 from 402 at present.

Stats SA will also introduce a breakdown of the overall CPI measure reflecting the differences between inflation in large towns and cities, small towns, and rural areas.

The last time Stats SA made changes to the index was in 2009, when the measure was overhauled to reflect international best practice.

Source: BDL


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