Rising petrol prices push inflation higher

·20 May 2015

South Africa’s inflation rate is set to increase to 4.5% as a continued result of petrol hikes, according to Fin24’s inflation expert.

The Inflation Factory’s (TIF) Riyadh Bhyat said the large petrol price changes are having a significant effect on Consumer Price Index (CPI), revealing that his Real Time CPI Index stood at 114.1 at the end of April, implying a year-on-year (y/y) inflation of 4.5% and month-on-month inflation of 0.9%.

Stats SA will release the official results later on Wednesday.

“This is the second monthly increase in (y/y) inflation following six months of decreases, and has been driven by the 14% increase in the petrol price in April,” said Bhyat.

“When coupled with the 10% increase in March these price hikes have taken petrol back to its November 2014 price.

“The large petrol price changes are having a significant effect on CPI,” said Bhyat.

The graph below shows what headline CPI would have been if the petrol price had not changed as it has since September 2014.

“The continued decrease in this normalised figure indicates the large contribution that petrol is having on the increase in the headline CPI figure and also lends some support to the Sarb holding rates steady at the upcoming MPC meeting,” he said in his monthly newsletter.

This month’s pre-CPI update looks at the real time bread index, which has increased at twice the CPI rate over the last year.

“Roman politicians said that through ‘panem et circenses’ (cheap bread and circuses) you could appease the population,” said Bhyat. “Does the converse hold?”

Fin24