Why your bills are ris­ing faster than in­fla­tion

If it feels like you are spend­ing more on ev­ery­thing from food to elec­tric­ity, it’s be­cause you are. Brace for tough times ahead, writes Maya Fisher-French

CityPress - - Tenders -

When­ever Stats SA re­leases the con­sumer price in­dex (CPI) fig­ure, I al­ways won­der whose bas­ket of goods they are us­ing. I can as­sure you that my liv­ing costs are in­creas­ing well above the 5.2% CPI recorded for the year to De­cem­ber 2015.

I de­cided to spend some time un­pack­ing the of­fi­cial CPI bas­ket to com­pare it to what would be a rea­son­able spend­ing pro­file of an ur­ban house­hold earn­ing and spend­ing R40 000 a month.

The CPI bas­ket al­lo­cates a per­cent­age to each item, bring­ing the to­tal bas­ket to 100%. So, for ex­am­ple, if an item rep­re­sents 5%, for ev­ery R40 000 house­hold bud­get, about R2 000 goes to that item. EDUCATION

1 Ac­cord­ing to Stats SA, the av­er­age house­hold is spend­ing about 2.95% of its bud­get on education, but that fig­ure is higher for many house­holds. If the house­hold has two chil­dren at a fee-based govern­ment school pay­ing about R1 200 per month per child, that fig­ure would rep­re­sent 6% of the house­hold bud­get – and we are not even talk­ing about pri­vate school fees.

Ac­cord­ing to Stats SA, education costs rose by 9.35% – well above in­fla­tion. The more of your bud­get you spend on education, the higher your over­all in­fla­tion rate will be. MEAT VEG

2 VS The items you pur­chase when you shop for your weekly gro­ceries will also af­fect your house­hold in­fla­tion rate. Food and non­al­co­holic drinks make up 15.41% of the CPI bas­ket, so that as­sumes that the R40 000 house­hold would spend R6 164 per month on food and drinks.

Meat, which makes up 4.56% of the bas­ket, ex­pe­ri­enced a 4.1% price hike last year, while breads and ce­re­als (mak­ing up 3.55% of the CPI bas­ket) had an above-in­fla­tion in­crease of 7.5%. Veg­eta­bles had one of the high­est price in­creases at 9.4%, but make up only 1.61% of the bas­ket.

This means a veg­e­tar­ian’s food bill will in­crease faster than an om­ni­vore’s. You can, how­ever, off­set your higher veg­etable bill by eat­ing less fats and oils, which went up by 14.1%, as well as cut­ting down on sugar and desserts, which ex­pe­ri­enced price in­creases of 9.4%. BEER WINE

3 VS The CPI in­dex has beer at 2.45% of the bas­ket. I would like to point out that this nearly equals the amount spent on education, ac­cord­ing to the CPI bas­ket, so maybe we spend too much on beer al­ready. But if a R40 000 house­hold spent even more than R980 per month on beer, its in­fla­tion fig­ure would be higher be­cause beer in­creased at an an­nual rate of 8.2%. Con­sider switch­ing to wine, which only in­creased by 5.7%. ELEC­TRIC­ITY

4 The CPI bas­ket al­lo­cates 4.18% of the house­hold bud­get to elec­tric­ity and other fu­els. That would be about R1 670 per month for a house­hold bud­get of R40 000. The more you spend on elec­tric­ity as a per­cent­age of your bud­get, the higher your house­hold in­fla­tion rate will be. WA­TER AND OTHER SER­VICES

5 Th­ese are es­ti­mated at 2.85% of the bas­ket, which would bring that R40 000 house­hold to R1 425 per month, which seems rea­son­able. How­ever, with wa­ter prices in­creas­ing 9.8% last year, the higher the per­cent­age you spend on wa­ter, the greater the ef­fect on your liv­ing costs. TRANS­PORT

6 This is one of those re­ally strange fig­ures be­cause to in­clude move­ments in car prices, Stats SA al­lo­cates 5.98% of the bas­ket to a new car. Prices of new cars in­creased below in­fla­tion at 3.8%, drag­ging down the over­all in­fla­tion rate, but if you didn’t buy a new car, it didn’t help you much.

In fact, a lot of the “nonessen­tial” items ex­pe­ri­enced far lower price in­creases, in­clud­ing pack­age hol­i­days, which only went up by 1.1%, or recre­ation and cul­ture, which went up by 2.6%. The prob­lem is that the less money we have, the less we spend on nonessen­tials and the greater per­cent­age we spend on “es­sen­tial goods”, push­ing our over­all in­fla­tion rate higher.

It is all a bit of a catch-22, but it is clear that your bills are just go­ing to keep ris­ing.

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