Inflation now at 6.1%

Statistics South Africa has just released their latest inflation data. Inflation is a measure of how fast things are getting more expensive. As time goes by prices tend to rise. There are a number of explanations for inflation but the fact is we have an economic system that creates inflation and over time prices will go up. The government has been inflation targeting but with two new folk at the helm this may now change. So what are the figures?

 

• Inflation now at 6.1%
• Food inflation at 5.6%
• Housing and utilities at 7.6%

 

The Consumer Price Index which is used to measure the inflation rate is made up of a 'basket' of goods that the 'typical' household would tend to use. The prices of the goods in that basket are then monitored for any price changes. That change will make up a component of the inflation figure. The various goods are also weighted in order to allow for the relative importance of the various goods. For example food is worth approximately three times more than household maintenance, this is then further weighted to take into account if it is a rural or urban area, and so on.

There has been some debate about the inflation basket but this will be the one that we are going to be using for the foreseeable future. We have come from a high inflation environment which lead to the whole interest rate inflation targeting cycle, but we are now heading into a lower inflation environment and with Gill Marcus at the Reserve Bank and and Pravin Gordhan at the Treasury then we may see some lifting of inflation targeting and some interest rate pressure easing. The latest inflation figures are good news. Knowing how fast things are getting more expensive allows you to plan your budget better.