Uncertainty over new inflation sums

Robert Laing

Robert Laing

We spend nearly as much on funerals as we do on petrol, according to the new basket of goods that the official inflation figures will be based on from next year.

While some economists agree with Investec Asset Management's view that the current method of calculating inflation exaggerates the problem, others question if the new method to be introduced from next year will understate it.

Mike Schussler, chief economist at T-Sec, questioned how plausible it was that electricity now accounted for a smaller slice of the average person's expenditure considering that more households had been added to the grid.

Similarly, more people now have cars yet the new way of calculating inflation lessens the effect of petrol price changes.

Patrick Kelly, Stats SA's executive manager in charge of the consumer price index, said the reason it has taken seven years instead of five to revise the basket is that many of the results seemed odd, and were carefully checked to show they really did reflect how South Africans spent their money.

"The new weightings are based on the Income and Expenditure survey done two years ago. Our initial reaction to things like fuel was also the results must be wrong, but they were backed up by industry figures showing the volume of petrol sold was virtually unchanged over the year the survey was done," he said.