A two-year delay by Statistics South Africa to implement rebasing and reweighting of the consumer price index basket has resulted in inflated data, Investec Asset Management said on Tuesday.
Data from Stats SA shows that the main CPIX consumer inflation gauge has persisted above the top end of the central bank’s 3% to 6% target band since April 2007, accelerating to a five-and-a-half year high of 10,9% year-on-year in May.
The Reserve Bank has cited soaring food and energy prices as the main drivers of inflation.
”Calculations by Investec Asset Management have shown that the real inflation rate in the economy is probably far lower than the official inflation number,” Investec said in a statement.
”Official CPIX for May was 10,9%, but had the numbers been rebased and reweighted last year as they should have been, our calculations show actual CPIX of 8,7%,” said Andre Roux, head of fixed income at Investec Asset Management.
Earlier this month, Stats SA said the consumer price inflation basket would change from 2009, with the weighting for food falling and transport increasing to reflect changes in spending patterns.
The agency said the new weights would be effective with the January 2009 consumer inflation release and were based on the 2005/2006 Income and Expenditure survey released in March, which showed that transport was the fastest growing spending category for South African households.
The survey showed that expenditure on food had declined proportionately since 2000, largely due to increasing wealth.
Investec’s Roux said the official rate of inflation would peak in September ”in the order of 13%” once the impact of this year’s electricity tariff adjustments was incorporated.
South Africa’s national energy regulator has allowed state power utility Eskom to raise tariffs by a total of 27,5% for 2008/2009. The utility had requested a 53% increase to help it cope with a power crisis.
The central bank’s monetary policy committee (MPC) has increased interest rates by a total of 500 basis points since June 2006 as it battles against inflation. It has raised rates by 100 basis points this year.
”There is no question that monetary policy has been based on the official published inflation rate. Rate increases this year would have been less likely had the MPC been aware that the real inflation number in South Africa was significantly lower,” Roux said.
”Monetary policy going forward should be based on the true inflation rate. They should not wait until January for the new official numbers.” – Reuters