Change to basket may push inflation

Posted On Friday, 01 March 2002 03:01 Published by
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Stats SA says changes to the weight of goods of services in CPI basket has not affected the outcome
Stats SA says changes to the weight of goods of services in CPI basket has not affected the outcome

Capital Markets Reporter

ECONOMISTS found their inflation forecasts off for the second consecutive day yesterday, as Statistics SA released data showing the targeted measure of inflation, CPIX increased 7,1% in January, against a market consensus forecast of 6,6%.

This was the first month that the three consumer inflation measures headline inflation, CPIX and core inflation have been calculated using the updated 2000 survey of South Africans' spending patterns.

Stats SA surveys 30000 households every five years to track changing spending patterns in SA.

But Stats SA stressed the changes to the weight of goods of services in the CPI basket had not affected the outcome.

But some economists warned that increased weightings for food, medical care and education, traditionally drivers of inflation, could put upward pressure on inflation.

In what some feel may prove to be a negative move for inflation this year, food's weighting in the CPIX basket has been increased from 19% in the 1995 survey to 21% in the reconstituted basket.

The effects of food prices on inflation was apparent when they are stripped out of the data. Headline CPI would have increased by an annual rate of 3,4% in January if food had been excluded, compared to 5%.

Food inflation was at 12,3% in January, up from 11,4% in December as meat, vegetables, grain products, milk, cheese and egg prices increased.

UBS Warburg economist Michael McClintock expected food prices to peak in three to four months as shortages were alleviated.

Prodigy asset management economist Johan Rossouw said food pressure on inflation would be more marked from now on, especially for those buying basic foods like maize meal.

Weightings for another major contributor to inflation over the last year, medical care and health expenses, were increased from 6% to 7,1%.

Surprisingly, the communications category, which featured internet use, cellular phone calls and handsets, was down-weighted as other categories increased.

Gambling has replaced life insurance and insurance on goods in the consumer inflation indices, as goods and services that have a weighting of less than 0,1 % were dropped from the basket.

Clothing and footwear, housing, furniture and equipment and the other goods and services category also decreased.

The agency also tracked provincial spending, and Gauteng accounted for the bulk of expenditure, making up 43% of all expenditure, KwaZulu-Natal was second with 20%, and Western Cape third with 17%.

The survey measured five expenditure groups, each of which accounted for 20% of the population.

The survey of these groups revealed the income and spending disparities in SA. The very low group, which spent R8070 and less a year, accounted for 1,39% of spending.

The 'very high' group, which spent R55160 and more, accounted for 71% of spending, an increase from the 1995 survey levels, when this group made up 68% of spending.

Publisher: Business Day
Source: Capital Markets Reporter

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