Inflation Rate hits 5% Mark

Just after receiving news about the dismal outlook for the local economy growth in 2015, another bad news this morning: July’s annual Consumer Price Index (CPI ) and therefore the inflation rate increased by 5%, according to Statistics South Africa (Stats SA). The rate was 0.3 of a percentage point higher than the corresponding annual rate of 4.7% in June 2015 and has reached the level of July 2012, from where inflation increased until it reached 6.6% in July 2014 (see graphic on the right).

On average, prices increased by 1% between June 2015 and July 2015, which is in line with analyst forecasts.

h3. Is your inflation higher than 5%?

The inflation rate might seem low compared to reality, according to an inflation expert. That’s because you probably fall into a higher income bracket. Over the last year, the most expensive products have increased by 17%, while the cheapest have decreased by 3%, The Inflation Factory (TIF) said yesterday. “The massive difference in wealth between the ‘rich’ and ‘poor’ has a major effect on the different products that these groups buy and their respective inflation rates, but these differences are completely invisible if you only look at one lone CPI number.”

According to Bloomberg, the South African Rand’s more muted effect on prices, mainly due to weak demand in the economy and increased competition among retailers, is benefiting the inflation outlook at the same time that oil prices trade near a six-year low of US$ 50 a barrel. “That gives Reserve Bank Governor Lesetja Kganyago scope to limit rate increases in an effort to support an economy hit by power shortages, falling commodity prices and strikes,” it reported.

We say: “Keep bracing yourself, the worst is still to come!”

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