We’re 10% poorer this year
EATING AWAY MORE AND MORE OF OUR SPENDING POWER
Inflation continues to slash consumers’ spending power drastically.
Official inflation is set at 6%, but that has no relation to Hilton Tarrant’s experience when he goes shopping.
Inflation has reared its ugly head high and most South Africans will not be experiencing anything close to the 6% reported by Stats SA.
Despite the rand’s recovery in the second half of last year, imported inflation finally arrived (“helped” also by inflation in developed economies). Woolworths’ update for the 26 weeks ended December 25 reported food “price movement” of 9.2%. That’s at least 9% more expensive than a year ago.
The situation is better – a little – at Shoprite across its three supermarket brands (Checkers, Shoprite, U-Save).
After managing to keep the “internal inflation” it measures to 5% and under, it reported price movement of 7.4% for the six months to December.
In the first quarter of its financial year, it said internal inflation of 7.2% was “driven by both the drought’s impact on fresh produce prices and basic commodity items as well as the weaker rand”. The rand has hit clothing prices hard – from 7.3% to double that (15.5%). Anecdotally, prices of higher-end imported brands are 20% higher in a year.
Broadly speaking, an increase of 10% year-on-year for education seems to be an accurate medium-term average. Crawford College Sandton is a sample of one, but tuition for grade 10 has increased from R111 120 in 2016 to R 118 900 this year, a 7% move. Discovery Health’s weighted average price increase of 10.2% for its medical aid contributions is a good proxy for the sector. The price of 95 octane unleaded petrol was R12.37 in January 2016, now it’s R13.33. And we all know what’s happening with electricity prices. Home loans and car repayments are over 5% higher than a year ago. In a stagnant economy with muted wage growth, consumers are going backwards. This is directly evidenced in those retailers’ trading updates.
And investment returns aren’t exactly shooting the lights out. An industry-leading balanced fund (the cheapest in the country) reports returns of 0.45% net of fees over the past 12 months. And this was a good result! The Satrix 40 Index Fund returned -2.38% last year.
What sparked this research was my realisation that in recent months, my monthly spending was scarily 15% to 20% higher than a year ago.
Hilton Tarrant (hilton@moneyweb.co.za) works at immedia