'New' CPI more exposed to power and fuel costs

New weightings show that oil and electricity will continue to dictate the inflation trajectory.

When the new consumer price index (CPI) weightings were released last year, Statistics South Africa highlighted "some of the main changes", such as the inclusion of items such as feta cheese, Marmite, vodka, plumbers, bricks, cement, energy-saving light bulbs, and the exclusion of items such as samp, Vienna sausages, paint, toasters and parking fees.

But as the new weightings came into effect in January this year, it has become clear that big-ticket items such as oil and electricity will continue to dictate the inflation trajectory.

The headline CPI annual inflation rate in January was 5.4% — 0.3 of a percentage point lower than the corresponding annual rate of 5.7% in December 2012, Stats SA reported on Wednesday. This was despite prices increasing, on average, by 0.3% between December and January.

It was well below consensus expectations of 5.7% year on year for January 2013, the group economist at Investec, Annabel Bishop, said in a press release. "Moderation in CPI inflation was likely due more to the new calculation method … than any actual significant moderation in price pressures," she said.

What did ease inflation, Stats SA said, was the petrol price, which fell by 13 cents a litre in January. Petrol prices were afforded a higher weighting in the new configuration and increased from 3.9% to 5.7%.

But Bishop warned this would mean a bigger petrol price impact on the CPI following a hike of 41 cents a litre in February and a likely hike of 85 cents a litre in March. She said these hikes could see the CPI climb towards 6% year on year.

The basket weighting on the food price remained almost unchanged, so rising food prices did not impact on the CPI, as had been expected. But, Bishop said, higher global food prices would push the measure up later in the quarter.

In a comment released by Nedbank, it said food prices did not increase as much as expected — only by 0.9% during the month. The price pressure from recent rand depreciation was yet to come through and inflation was still likely to breach the 6% upper target for a few months in the second half of the year, under pressure from a weaker rand and increases in administrative prices.

Stanlib expected inflation to average 5.6% in 2013.

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