The rate of inflation is above central bank targets in virtually every major developed and emerging market economy, says senior emerging markets economist at Schroders David Rees.
Inflation in the G7 group of countries climbed to 7% year-on-year (y/y) in March, with South Africa’s annual headline inflation rate currently at 5.9% in April – compared to 4.4% a year ago.
Rees said the roots of the current bout of global inflation could be traced back to the start of the Covid-19 pandemic when a large imbalance between the supply of and demand for goods emerged.
The global economy contracted sharply in the first half of 2020 as lockdowns were imposed, but what followed was an unusual recession as most households were shielded from economic pain, he said.
“More recently, the spillover from tragic events in Ukraine has exacerbated those underlying inflation trends as commodity prices have soared. That has poured fuel on the fire and lifted inflation yet further.”
Although headline rates of inflation may soon begin to decline, concerns remain that they will do so relatively slowly, said Schroders.
What’s R100 worth?
Statistics South Africa has recorded consumer price inflation over an extended period of years. Its updated historical CPI headline index showed that the 1980s was a period of climbing inflation that reached a record high of 19.7% in September 1986. It further revealed that the year-on-year inflation rate for April of 1980 was 13.4%.
CPI headline indexes can be used to calculate the equivalent buying power of R100 between 1980 and 2022. The consumer price index (CPI) is a metric to reflect changes in the rate of inflation and measures changes in price for a range of consumer products, said Stats SA.
Stats SA’s data shows that in April 1980 the CPI headline index was set at 3.2. By comparison, the CPI headline index is at 102.4 as of its latest recording.
To calculate today’s value of R100 after inflation, one must multiple R100 by the CPI of 2022 divided by the CPI of 1980. This calculation shows that R100 in 1980 would be roughly equivalent to R3,200 in 2022.
Prices of goods 1980 vs 2022
The latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) shows that the prices f 37 out of 44 core food items increased in price between April 2021 and April 2022. The most significant rise cost increase was seen in cooking oil, which rose 42%.
The below table shows how the price of certain goods in 1980, as provided by StatsSA and the National Debt advisors, compares to the same or similar products today.
For comparison purposes, prices from four of the country’s major retailers (Woolworths, Checkers, Pick n Pay and Spar) were considered to reach an average cost figure.
|Item||The average cost in 1980||The average cost in 2022|
|2kg white rice||R1.19||R28.49|
|Simba chips (large,120g)||R0.99||R18.32|
|Kellogg’s cornflakes (500g)||R1.49||R45.49|