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New-Look CPI From January

| News by Staff Reporter

With larger weights attached to certain administered prices

South Africa’s Consumer Price Index (CPI) is set to take on a new look from January next year which will better reflect the steep price increases faced by consumers.

This is according to The Financial Mail, who said the new-look CPI would likely give a larger weight to administered prices like food, electricity and fuel, which could possibly bias headline inflation of the new CPI basket upwards.

It said that while the official consumer price inflation rate was 6% many consumers would feel that this did not reflect their personal experience.

“This is partly because the CPI basket is underweight in precisely those items that many South Africans are forced to spend their income on,” said Claire Bisseker of The Financial Mail.

She said electricity was weighted statistically as 1,68% in the overall CPI basket; petrol had a weighting of 3,93%; water and other services to do with housing had a weighting of 3,31%; medical insurance had a 3,68% weight; and education’s weight was 2,19%.

Bisseker said the problem was that Stats SA introduced these weights in 2009 based on income and expenditure patterns of South Africans in 2005/2006.

“Since then, products and services with administered prices — like electricity and municipal rates and services — which most consumers have no choice but to pay, have generally been increasing far in excess of the general rate of inflation,” she said.

Read the full article here.

Source: www.bizpremises.co.za