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Is Inflation Picking Up?

Posted on 04/03/202104/03/2021 by Keith McLachlan

As with most of the world, South Africa’s inflation rate has been falling for a number of years. This becomes incredibly clear when you see it visually:

Yet, globally bond yields are lifting, yield curves are pushing out, soft and hard commodities are rallying & energy prices are rising. All the indications are that inflation is starting to appear. (Indeed, I am sure most of you feel that your spending power is no longer going as far as it used to too. All hallmarks of inflation.)

Yet, our South African CPI is only reported at 3.2% (January 2021).

Ignore this stat. CPI has its own flaws in both its calculation and the weighting and selection of goods and services it uses.

Rather, glance at our listed retail and consumer stocks and see the inflation rates they are reporting across their sales:

CompanyPeriodMajority of ProductsSelling Price Inflation (%)
Truworths26 weeks ended 27 Dec 2020Clothing0,0%
Woolworths (Clothing)26 weeks ended 27 Dec 2020Clothing2,4%
Clicks21 weeks ended 24 Jan 2021Health products3,0%
Rhodes Foods (Regional Fresh)Sep 2020 – Feb 2021Food products3,2%
Pick ‘n PayMarch – Aug 2020Groceries3,4%
Dis-Checm22 weeks ended 2 Feb 2021Health products3,6%
Mr Price13 weeks ended 26 Dec 2020Clothing3,8%
ShopriteJune – Dec 2020Groceries4,3%
CashbuildJune – Dec 2020Building materials4,5%
Massmart9 months ended Sep 2020Groceries4,5%
Woolworths (Food)26 weeks ended 27 Dec 2020Groceries4,8%
PepkorOctober – Dec 2020General5,0%
Spar18 weeks ended 18 Jan 2021Groceries5,1%
ItatileJune – Dec 2020Building materials6,0%
LibstarOctober – Dec 2020Food products8,1%
Tiger BrandsOctober – Dec 2020Food products9,0%
Rhodes Foods (Long Life)Sep 2020 – Feb 2021Food products10,0%

This short selection of public companies is far from representative of the economy. Also, each company is different, has differing input costs and offers different retail baskets to different consumers. Also, these companies are reporting inflationary stats across different time periods.

In other words, this is not very representative nor comparable and, at best, only anecdotal.

Yes, despite being anecdotal, it does paint a persuasive picture that the average inflation out there in the real world is markedly higher than the 3.2% CPI. And, if anything, it is rising (see how the more recent the update from a listed stock, the higher its typical inflation rate, particularly if it is retailing food).

Let’s show the above table visually:

While I lay out the endless caveats in this working, it does highlight that domestic inflation certainly has (pockets) that are way above reported CPI. Ignore this at your own peril.

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