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Concern as food inflation spirals

Sep 18 2014 12:55
Adriaan Kruger

Reach for Ricoffy as Nescafé skyrockets from R49 per jar a year ago to R72. (Adriaan Kruger)

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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.

inflation  |  sa economy  |  cpi
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