So, what is inflation and how is it measured?
Every month, Statistics SA releases the annual consumer inflation figures, which answers the question: to what extent has the cost of living gone up (or down)?
Their measurement, known as the consumer price index (CPI), is based on a “basket” of 412 goods and services that the average household uses. It is determined by the total spend (countrywide) on an item, as well as by the number of households that buy a particular item. It doesn’t include overly expensive items, like jet skis or quad bikes, that few households buy – or cheap items, like matches, that have little effect on our pockets.
The items carry different weightings, according to how much of the average household budget they take up, Statistics SA says. As this changes over time, the basket is reassessed every four years, and was last adjusted in January 2017. Instant noodles, frozen pizzas and pies, ready-mixed flour products, levies for sectional title schemes, video games, diesel and driving lessons were added to the basket. And in a sign of the times, postage stamps and pre-recorded DVDs, among other items, were dropped.
The food portion of the basket consists of 124 products and, of these, 34 are considered minimum food needs. Food and non-alcoholic beverages make up just over 17% of the current basket.
Statistics SA explains that they monitor price by employing price collectors who visit sampled outlets and markets every month to record actual prices on the shop floor, to assess the overall change in price. These changes show the increase (or decrease) in the cost of living – which is the rate of inflation (in layman’s terms). However, Statistics SA notes that in our own households, we might experience inflation at a different rate, depending on the types of goods and services we use.
To define it more formally, the annual inflation rate is the change in the consumer price index in the current month compared to the same month a year ago. This change is expressed as a percentage. Since April 2017, inflation has averaged 4.7%.