Gin in, satellite dishes out in South Africa inflation reboot

The inflation basket is reviewed at least every five years to ensure it represents consumer spending, with changes made for reasons ranging from improved technology to popularity, Patrick Kelly, chief director of price statistics at Statistics South Africa, said in an online presentation on Monday.

Other inclusions are razors, dairy, fruit-juice blends, pureed baby food and jam, and product weightings were determined using 2019 spending patterns to exclude coronavirus-induced economic disruptions.

The previous basket of 404 items included several that will no longer be taken into consideration, such as DVD players and satellite dishes.

The agency based its update of the consumer price index on national accounts data, which measures economic activity, and information provided by retailers, rather than the more comprehensive household income and expenditure or living conditions surveys. The change, which is being instituted for the first time, was due to funding constraints.

Most of the weighting changes were small compared with previous revisions, which Kelly attributed to the different source data and methodology.

The biggest adjustment was an increase in the weighting of alcoholic beverages and tobacco — to 6.3% from 5.8%.

The central bank raised its benchmark interest rate on Jan. 27, prompted by upward revisions to its inflation forecasts and energy-price assumptions. The annual inflation rate surged to an almost five-year high in December, while the price of oil continues to recover from a coronavirus pandemic-induced slump.

The bank now sees headline consumer price growth averaging 4.9% this year, before returning close to the 4.5% midpoint of its target band at which it prefers to anchor inflation expectations through 2024.