Cost of living shoots up

2013-03-21 00:00

THE cost of living in South Africa — as measured by the Consumer Price Index (CPI) — shot up in February on the back of higher transport costs.

The CPI for February rose to 5,9% from 5,4% during the previous month, Statistics South Africa said yesterday.

“The miscellaneous goods and services index increased by 5,4% between January 2013 and February 2013, mainly due to a 9,9% increase in health insurance. The annual rate increased to 7,5% in February from 4,9% in January,” Statistics South Africa added.

The CPI in KwaZulu-Natal was 5,9% in February.

The latest data were based on a new re-based and re-weighted CPI basket, according to Standard Bank economist Shireen Darmalingam.

She said the fuel price increases of February had influenced the latest CPI and that ongoing price increases would weigh heavily on future CPI readings.

“Petrol has a materially higher weight in the new CPI basket. Thus, the 81 cents per litre increase in petrol prices in March and an expected increase in April pose significant upside risks to the general inflation trajectory.”

“Nersa [National Energy Regulator of South Africa] granted Eskom a tariff increase of eight percent per year for five years, half of what Eskom had applied for. The eight percent increase … bodes well for the inflation trajectory, particularly given that the electricity weight in the new CPI basket has been raised to 4,13% versus 1,68% in the old basket.

“The risk to our forecast in 2013 is again expected to emanate from rising fuel prices, second-round effects from the rise in producer prices, wage developments, and movements in the exchange rate,” said Darmalingam.

Nedbank economist Busisiwe Radebe said that while fuel costs would remain a thorn in the flesh of consumers, interest rates were likely to remain steady this year.

“The outlook for inflation has deteriorated considerably, mainly on the back of the weaker currency.

“The March inflation number will include a 6,7% month-on-month increase in the petrol price. In April, the fuel and Road Accident Fund levies will add … to the petrol price. This will put more upward pressure on inflation, causing it to breach the six percent target range sooner than the third quarter of this year as we had forecast earlier.

“We believe that a neutral policy stance will best balance weak growth and rising inflation. Rates will remain at current levels for most of the year,” said Radebe.

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