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
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.