Concern as food inflation spirals

Concern as food inflation spirals

2014-09-18 12:55

Port Elizabeth - There were no gasps of surprise following the news that SA's inflation rate once again exceeded the upper level of the Reserve Bank’s inflation target in August. Of concern should be the specific categories of products which keep increasing prices at a rapid rate.

Consumer inflation (headline CPI) increased to 6.4% compared with 6.3% in July, against the Reserve Bank’s target to keep inflation between 3% and 6%.

Read: SA's August inflation quickens

Inflation below 3% signals very weak demand in the economy and little incentive for companies to increase production and hire more workers, while inflation above 6% leads the economy down a dangerous path of pricing goods and services out of reach for people to afford.

A closer look at inflation in different categories – Statistics SA produces a long list of inflation figures which deserve more attention than the few usually reported on – shows interesting and worrisome changes in prices.

For instance, the August price survey showed that prices increased more rapidly for non-durable goods (at an annual rate of 7.4%) than for durable goods (which were only 4.5% more expensive than a year ago).

This means that the prices of the stuff we need every day – like food and electricity - are increasing rapidly, but longer-lasting products like television sets and cellular telephones are relatively more affordable.

This is true. Most people will be quite happy to pay R599 for a small smartphone, but a quarter of a shopping trolley of groceries seems overpriced. Stats SA’s August price survey showed that prices of telecommunications equipment dropped on average by 11.6% since last year, but food became significantly more expensive.

It is sometimes difficult to bring the official inflation rate of 6% in line with prices we see on shop shelves. Or maybe the guys at Stats SA drink Ricoffy and not Nescafé, which increased to R72 per jar from R49 a year ago.

Stats SA did pick it up: food inflation increased to 9.4% in August compared to 8.8% in July. Food inflation was only 3.5% in December last year.

Drumsticks replacing lamb braai chops

The official statisticians point out that the price of meat increased significantly during August, especially the price of lamb and mutton. Stats SA says that the price of lamb and mutton increased 3.5% between July and August.

Consumers have picked this up with drumsticks replacing lamb chops (lately R109 per kg) on Saturday’s braai grid. And more people are opting for beer (increasing only 4.5% year-on-year) rather than brandy (prices of spirits surged by 8.7%).

Meat prices overall have risen by some 10.1% compared to August last year. Retail prices for milk and cheese increased even faster during August, by 12.7% year-on-year.

The price index for household furniture and textiles shows trouble in the furniture retail sector. Prices have dropped compared to year ago, by just less than 0.5%. Lower process and sales volumes have been seen in recent results of furniture retailers, which have announced losses of several billion rand during the last 12 months.

Poor hardest hit

It is interesting that inflation in rural areas is higher than in urban areas, while the inflation rate for the basket of goods and services consumed by poorer people was much higher than the corresponding number for products consumed by richer people.

The CPI for rural areas lifted to 7.1% in August compared to 6.4% in urban areas.

Inflation for households that spend less than R35 000 per annum was 6.6% in August while households that spend more than R142 000 saw prices of their goods and services go up by a slightly smaller 6.3% since a year ago.

Inflation even affects children’s spending habits and consumption. More lunch boxes will carry apples this month and fewer will contain sweets. Fruit inflation is running at 2.4%, while Stats SA calculated that inflation for sweets and desserts rose to 8.5% during August.

  - Fin24

Are price increases justifiable? Add your voice to the food inflation debate.

  • Gustav Brink - 2014-09-18 13:49

    Government is the reason for the increase in prices. Last year ITAC (the International Trade Administration Commission) increased duties on all poultry products as well as on several other products; this year they imposed an additional duty (in the form of a safeguard) of more than 40% on potato chips (french fries) despite industry making record profits, and they have now slapped duties ranging from 20% to more than 70% on poultry imports through following incorrect processes, making incorrect calculations and disregarding law, knowing it will take too long and cost too much to challenge them in court. Chicken prices should actually be coming down as feed prices, the most expensive cost they have, decreased by more than 40% since January (from more than R3000/ton to under R1800/ton), but instead prices simply continue to go up

  • Joseph Rudolf Opperman - 2014-09-18 15:05

    1.It is the end of the year when the poor battered consumer has a bit more disposable cash, the whole food chain will take an extra cut this time of year. 2.The consumer has to eat and it is immaterial if the consumer stops buying lamb chops because the price of chicken wings will go up as well. 3. The basket of goods in rural areas is made up of basic foodstuffs and the increases reflected here show a lack of compassion. But then I am pretty sure senior management in the companies concerned will protect their bonuses.

  • Simon Stamp - 2014-09-18 15:05

    Food prices follow the supply and demand principles. Wonder what the food prices would be if the 1700 farmers were not murdered since 1990, the food supply would have been higher, so the prices might not have been so high.

      Simon Stamp - 2014-09-18 16:30

      I was just stating some facts, and then wondered what it would be like if it wasn't for the murders. I am not a farmer (just a proud boer)but reckon my comment does relate to this topic.

      Bruce Law - 2014-09-18 16:47

      Mpho, you are very rude and ignorant as well. His comment was entirely valid. I suggest you learn how to engage in discourse in a more civilized manner.

  • John Williamsii - 2014-09-18 15:24

    If Eskom was privatized, the electricity market opened and if the farming reform was better handled, prices would not have increased as quickly.

      Danvig de Bruyn - 2014-09-18 16:39

      Did You study economics? Clearly not.

  • Itumeleng HardBones Masapo - 2014-09-18 16:23

    Lol i wonder who came up with the economy...cause they sure did come with a brilliant plan to impoverish people while they play golf and forever get rich!!!

  • Carl De Beer - 2014-09-18 16:51

    Remember when us "whites" went shopping pre 1995 and stocked up on cans of food and bought gas braais etc?.. well I seriously and sadly can say, it has now become a reality!

  • Hell Gate - 2014-09-18 18:47

    It's obvious the ANC government has mismanaged the economy. Anc will contiunue taking us hyperinflation. The government has manipulated the inflation which is closer to 12-15% bracket for obvious reasons.. May all the ANc voters enjoy the high food prices and overall rising costs while the ministers shop at Woolworths and splash out on parties...

  • laudenkirk - 2014-10-01 10:24

    Everything is based € price not $. It's 14 rand to 1€

  • laudenkirk - 2014-10-01 10:25

    I'm in Greece.. Very similar prices

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