Latest news with #JohannEls
IOL News
27-05-2025
- Business
- IOL News
SA inflation at 2. 8%: Why it feels higher and how to calculate your personal inflation rate
Although the official inflation rate is 2.8%, many South Africans feel prices are rising faster than that. To help people understand their personal cost increases, Statistics South Africa offers a DIY guide on its website for calculating individual inflation based on personal spending Image: Ayanda Ndamane/ Independent Newspapers. With the official inflation rate at 2.8%, consumers may be asking themselves how this is possible because their experience at the till point belies the number recently put out by Statistics South Africa. The official statistics agency has, however, made it easy for people to calculate their own inflation basket. On its website, it provides a do-it-yourself guide to working out how much items are going up each month for the ordinary South African. Last Wednesday, Statistics South Africa issued the latest Consumer Price Index (CPI) print, which went up from 2.7% in March to 2.8% in April. This increase in the cost of living was a bit higher than Old Mutual chief economist Johann Els had expected (2.6% to 2.5%), although it was lower than what Investec chief economist Annabel Bishop had anticipated (closer to 3%). The data indicated that the higher rate was driven by housing and utilities, food and non-alcoholic beverages, alcoholic beverages and tobacco, as well as restaurants and accommodation services. So, how do you calculate your own household CPI? Focusing on the example of education, Statistics South Africa said that the first step was to look through the 391 products in its Excel dataset to identify those associated with education. Statistics South Africa does not include all items on which consumers spend money in every monthly basket. In the spreadsheet, it said, there are 20 items relevant to education, which are across different categories in its CPI basket, which was last updated in January. For example, it noted, school uniform items are classified under clothing and footwear, while textbooks and books are listed under recreation, sport and culture. Consumers may also want to add aspects such as sporting equipment. Building a separate spreadsheet for all these items is advised. The second step Statistics South Africa details is identifying the weights associated with the product, which are also in the spreadsheet. This determines each item's contribution to increases in total household spending. For example, school jerseys account for 0.07%. Adding together the 20 items Statistics South Africa identified for its example, the weight of education in terms of this category's contribution to increases in cost of living, it gets to 3.61%. The agency then demonstrated the calculations (third step) that are required to work out each product's contribution to its custom basket, which requires adjusting weights. This is done by dividing the basket weight for each product as listed in the spreadsheet by the total of 3.61%. For example, the calculation for school jerseys is: 0.07/3.61 = 0.020, which provides the weight of school jerseys in terms of the custom basket for education. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Calculate a weight for each product in the custom basket Image: Stats SA Step four involves requires sourcing price indices for two time periods from the spreadsheet that will, eventually, provide the inflation rate for our custom basket. In this example, indices for February 2025 and March 2025 are selected, which will show the month-on-month increase for the basket when all the calculations are complete. Source product-level price indices from published data Image: Stats SA Step five is to calculate two price indices (one for February and one for March) for the custom basket as a whole. 'This is the trickiest part of the exercise but can be easily done in Excel,' said Statistics South Africa. (Or one could use an alternative software provider's tools.) Two calculations are involved. First, determine a weighted index for each product by multiplying the product's price index by its weight. For example: School jerseys: 101.1 x 0.020 = 2.02 This needs to be done for each product in the list, it explains, which will result in 20 weighted indices for February. The second calculation is to add up all these weighted indices to give us an aggregate index for our basket, which is 100.1 for February. The same method returns an overall index of 103.9 for March. Calculate price indices for the custom basket as a whole Image: Stats SA Finally, it noted, the sixth step is to calculate the percentage change in price – which then provides the inflation rate – for the custom basket using these the February and March indices. Subtract the February index from the March index, divide the difference by the February index and multiply by 100: [(103.9 – 100,1) / 100.1] x 100 = 3.8 This will show that the increase in the overall price of education – based on the products in the customised list – increased by 3.8% between February 2025 and March 2025. Calculate percentage change in price for the custom basket Image: Stats SA The same percentage change formula is used to calculate an inflation rate for each of the 20 products. The price of school socks decreased by 0.3 percentage points between February and March. Fees for public secondary education and after-school centres increased by 6.8 percentage points. The information to work out a do-it-yourself basket is available on the Statistics South Africa website. IOL
IOL News
21-05-2025
- Business
- IOL News
South Africa's CPI rises to 2. 8%: What it means for interest rates
The Consumer Price Index rose to 2.8% in April, up from March's 2.7%, contrary to some economists' expectations of a decrease. Image: Henk Kruger/African News Agency (ANA) The Consumer Price Index (CPI) rose to 2.8% in April, up from March's 2.7%, contrary to some economists' expectations of a decrease. Despite this, there is still hope that interest rates may come down at the end of this month by 0.25 percentage points. The current prime lending rate is 11%. Old Mutual chief economist, Johann Els, noted that the number was 'a touch higher than expected' as the consensus seemed to be for 2.7%, although he expected that the rate of growth in the cost of living could slow to 2.6% or as little as 2.5%. He explained that the 2.8% figure is 'still below the bottom end of the 3% to 6% target range'. Inflation history and forecasts Image: Stats SA/Investec Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Els, who expects an interest rate cut towards the end of the month, pointed out that the rand is stronger than 18 to the dollar, having dropped as low as R17.89 on Wednesday morning. He added that oil prices are lower, with Brent crude currently at $66.26 a barrel, and more petrol price cuts are coming. 'Global risks have eased quite substantially between the previous Monetary Policy Committee (MPC) meeting and the one coming up. So, rates should be cut by 25 basis points next week,' Els said. 'I still think that under these circumstances; the South African Reserve Bank (SARB) should cut rates next week at the next scheduled MPC meeting. It is a close call,' said Els, adding that there is likely to be a split vote. Concurring, Casey Sprake, economist at Anchor Capital, told IOL that the latest inflation data strengthens the case for monetary easing. 'We expect SARB to cut the repo rate by 25 basis points at its upcoming MPC meeting on May 29,' she added. SARB Governor Lesetja Kganyago holds the deciding vote when the committee, comprised of five members, takes their ballot. A third rate cut later in 2025 is possible, depending on domestic and international factors such as commodity prices, currency movements, and geopolitical risks, said Sprake. Disagreeing is Investec chief economist, Annabel Bishop, who said: 'We expect that the Reserve Bank will leave interest rates unchanged at its meeting this month, as it remains concerned over the high degree of uncertainty in the global outlook.' However, she noted that much will depend on whether new inflation targets are announced in the National Budget later today, with National Treasury setting the inflation targets and SARB responsible for achieving them. Kganyago has suggested reducing the target band, contingent upon National Treasury implementing necessary policies. Sprake said that the inflation rate 'suggests a continued softening of underlying inflationary pressures within the domestic economy, reflecting a broader trend of subdued pricing momentum across non-volatile goods and services'. Examining the numbers, Els said that consumer goods inflation remains very low. 'In fact, surprising to the downside. For instance, vehicle prices declined in the month of April from March and vehicle inflation is now just 2.1% on a year-on-year basis. 'If we look at why inflation came out a touch higher than expected, alcoholic beverages rose more than expected between March and April and data and information services was higher than expected. Mobile data, for instance, rose by 3.1% month-on-month,' said Els. Sprake noted that inflation for food and non-alcoholic beverages accelerated to 4.0%, the highest rate since September 2024 (4.6%). Monthly prices rose by 1.3%, driven mainly by higher meat prices like stewing beef, mince, and steak. Meat prices increased by 2.3% between March and April, marking the largest gain since January 2023. As meat makes up 5.1% of household spending, these increases impact consumers significantly, especially lower-income households. Els explained that internet costs rose by 2.1% month-on-month, satellite TV subscriptions rose by 4.2% month-on-month and subscription to other streaming services by 1.8% month-on-month. 'These are irregular surveys, so just capturing the latest annual increases in mobile data and subscription services for TV. So those were higher than expected.' Sprake noted that lower fuel prices were benefiting the inflationary figure as, on average, fuel prices dropped by 3.2% between March and April. Compared to a year ago, motorists are now paying 13.4% less for fuel, she said. Els said that inflation remains 'well under control'. The headline number for the next few months is expected to remain below bottom end of the target range, mostly around 2.5% to 2.7%, before gradually drifting up, said Els. IOL
IOL News
21-05-2025
- Business
- IOL News
South Africa's CPI rises to 2. 8%: What it means for interest rates
The Consumer Price Index rose to 2.8% in April, up from March's 2.7%, contrary to some economists' expectations of a decrease. Image: Henk Kruger/African News Agency (ANA) The Consumer Price Index (CPI) rose to 2.8% in April, up from March's 2.7%, contrary to some economists' expectations of a decrease. Despite this, there is still hope that interest rates may come down at the end of this month by 0.25 percentage points. The current prime lending rate is 11%. Old Mutual chief economist, Johann Els, noted that the number was 'a touch higher than expected' as the consensus seemed to be for 2.7%, although he expected that the rate of growth in the cost of living could slow to 2.6% or as little as 2.5%. He explained that the 2.8% figure is 'still below the bottom end of the 3% to 6% target range'. Inflation history and forecasts Image: Stats SA/Investec Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Els, who expects an interest rate cut towards the end of the month, pointed out that the rand is stronger than 18 to the dollar, having dropped as low as R17.89 on Wednesday morning. He added that oil prices are lower, with Brent crude currently at $66.26 a barrel, and more petrol price cuts are coming. 'Global risks have eased quite substantially between the previous Monetary Policy Committee (MPC) meeting and the one coming up. So, rates should be cut by 25 basis points next week,' Els said. 'I still think that under these circumstances; the South African Reserve Bank (SARB) should cut rates next week at the next scheduled MPC meeting. It is a close call,' said Els, adding that there is likely to be a split vote. Concurring, Casey Sprake, economist at Anchor Capital, told IOL that the latest inflation data strengthens the case for monetary easing. 'We expect SARB to cut the repo rate by 25 basis points at its upcoming MPC meeting on May 29,' she added. SARB Governor Lesetja Kganyago holds the deciding vote when the committee, comprised of five members, takes their ballot. A third rate cut later in 2025 is possible, depending on domestic and international factors such as commodity prices, currency movements, and geopolitical risks, said Sprake. Disagreeing is Investec chief economist, Annabel Bishop, who said: 'We expect that the Reserve Bank will leave interest rates unchanged at its meeting this month, as it remains concerned over the high degree of uncertainty in the global outlook.' However, she noted that much will depend on whether new inflation targets are announced in the National Budget later today, with National Treasury setting the inflation targets and SARB responsible for achieving them. Kganyago has suggested reducing the target band, contingent upon National Treasury implementing necessary policies. Sprake said that the inflation rate 'suggests a continued softening of underlying inflationary pressures within the domestic economy, reflecting a broader trend of subdued pricing momentum across non-volatile goods and services'. Examining the numbers, Els said that consumer goods inflation remains very low. 'In fact, surprising to the downside. For instance, vehicle prices declined in the month of April from March and vehicle inflation is now just 2.1% on a year-on-year basis. 'If we look at why inflation came out a touch higher than expected, alcoholic beverages rose more than expected between March and April and data and information services was higher than expected. Mobile data, for instance, rose by 3.1% month-on-month,' said Els. Sprake noted that inflation for food and non-alcoholic beverages accelerated to 4.0%, the highest rate since September 2024 (4.6%). Monthly prices rose by 1.3%, driven mainly by higher meat prices like stewing beef, mince, and steak. Meat prices increased by 2.3% between March and April, marking the largest gain since January 2023. As meat makes up 5.1% of household spending, these increases impact consumers significantly, especially lower-income households. Els explained that internet costs rose by 2.1% month-on-month, satellite TV subscriptions rose by 4.2% month-on-month and subscription to other streaming services by 1.8% month-on-month. 'These are irregular surveys, so just capturing the latest annual increases in mobile data and subscription services for TV. So those were higher than expected.' Sprake noted that lower fuel prices were benefiting the inflationary figure as, on average, fuel prices dropped by 3.2% between March and April. Compared to a year ago, motorists are now paying 13.4% less for fuel, she said. Els said that inflation remains 'well under control'. The headline number for the next few months is expected to remain below bottom end of the target range, mostly around 2.5% to 2.7%, before gradually drifting up, said Els. IOL
IOL News
21-05-2025
- Business
- IOL News
BREAKING: Rate of increase in cost of living accelerates in April
Food basket. The rate of increase in the Consumer Price Index (CPI) went up a percentage point in April The rate of increase in the Consumer Price Index (CPI) went up a percentage point in April, to 2.8%, when compared to March's 2.7%, defying expectations from at least one economist that it would come down. Old Mutual chief economist, Johann Els, had been hopeful that it would drop to 2.66%, or even 2.5%. However, Investec chief economist, Annabel Bishop, had expected the rate of increase in CPI to be nearer to 3% for the month of April. Statistics South Africa data out on Wednesday morning indicated that the higher rate was driven higher by housing and utilities, food and non-alcoholic beverages, alcoholic beverages and tobacco, as well as restaurants and accommodation services. Food inflation has been a particular bugbear in terms of monthly increases. Earlier this month, the agency noted that year-on-year, income from accommodation increased by 12.2% in February. This was the result of a 2.4% increase in the number of stay unit nights sold and a 9.5% increase in the average income per stay unit night sold. Sectors that aided keeping inflation well inside the target band of 3% to 6% included slower cost of living gains in goods and services. South African Reserve Bank (SARB) Governor Lesetja Kganyago has been publicly suggesting that the target band will be shrunk for some time, which can only be done if National Treasury implements the necessary policies 'Markets are anticipating the announcement of a new inflation target, with the range currently 3% to 6% year-on-year and the midpoint of 4.5% year-on-year. National Treasury is likely to prefer a gradual descent, as opposed to the SARB's preference of close to 3% year-on-year,' Annabel Bishop. In a recently published note, Statistics South Africa explained that the inflation basket of goods and services forms the foundation for calculating CPI. It identifies products that South African households spend the most money on, and these are incorporated into the basket. The current version of the basket, updated in January 2025, consists of 391 products. The basket was updated towards the end of January. Prior to this, it last updated the basket in 2022, using data from 2019. The weights are now based on data for 2023. Through a complicated process, the official statistical agency determines weights of each product and calculates the increase in prices, which then informs inflation. Statistics South Africa does not measure the entire basket each month, a rider on the data release noted. IOL
IOL News
16-05-2025
- Business
- IOL News
Interest rate cut anticipated as inflation declines in South Africa
Inflation data is due out on the same day as National Budget 3.0, with an announcement from the South African Reserve Bank to be made the following Thursday. Image: Ai As the cost of living continues to decline, with the latest inflation figures due out next Wednesday, those in the know are betting on an interest rate cut, even though it may be a close call. Inflation data is due out on the same day as National Budget 3.0, with an announcement from the South African Reserve Bank to be made the following Thursday. On the back of recent easing in the oil price, a more stable rand exchange rate, and easing global trade tensions compared when to the March Monetary Policy Committee (MPC) meeting, the South African Reserve Bank should cut rates by 0.25 percentage points, said Old Mutual chief economist, Johann Els. 'I still think it's going to be split decision by the MPC and there might still be warnings around global risks, but these risks have eased substantially since the March meeting,' he noted. The MPC is made up of five people, with South African Reserve Bank Governor Lesetja Kganyago having the swing vote. Currently, the prime lending rate is 11%. 'With inflation this low across all categories… there is certainly room for at least 75bps of rate cuts over the next few meetings. The Reserve Bank will probably not cut by 75bps, but only 50bps,' said Els. He explained that this would be a two-meeting process. Nolan Wapenaar, Anchor Capital co-chief investment officer, said his view was to see a 0.25 percentage point interest rate cut later this month followed by the same decline at the next meeting. 'Skipping a cut in interest rates in May would be a missed opportunity. There is certainly a window of opportunity at the moment to cut rates,' said Els. Given reports that National Treasury and the central bank are looking at reworking the inflation rate target to a narrower band than the current 3% to 6%, Wapenaar said this could mean fewer rate cuts for South Africa in the near term than there would have been. Kganyago has been publicly suggesting that the target band will be shrunk for some time. Els, however, said that such a policy move will take time to come into effect. On inflation, Els said that the April Consumer Price Index (CPI) is likely to come in at 2.6% when compared with the year-on-year rate currently of 2.7%. He added that there was a chance that the increases in the cost of living could come in at 2.5% year-on-year. 'However, even 2.6% is exactly half the 5.2% of April 2024, a remarkable improvement in inflation over the past year. My expectation for the April number of 2.6% but also very subdued price pressures seen everywhere else,' said Els. Els explained that fuel dropped 76c a liter at the beginning of May versus a 65c a liter increase a year ago, which means that the base effect is already assisting lower inflation. In addition, he said there was very little price pressure from consumer goods, food, or services. 'In terms of the inflation numbers over the next few months, May inflation and June inflation will likely also be close to 2.5%. In fact, my average second quarter CPI inflation forecast is 2.5%,' said Els. He added that his average for the year is 3.2%. Thanks to the declining oil prices, a decline of 25% since January in rand terms, South Africans could see more petrol price cuts coming in June, said Els. IOL
