Stats SA runs short of cash, so might run short on data
● A lack of funding for statistical surveys may cause Stats SA to fall foul of standards required by the International Monetary Fund (IMF) for the reliability of statistics.
The funding shortfall means Stats SA is unable to undertake surveys that are necessary for it to update the consumer price inflation index (CPI) weights by the next deadline in 2022.
Patrick Kelly, chief director of price statistics at Stats SA, said this week that the agency has been engaging the National Treasury for five years.
It requires about R290m over two years for the surveys.
Kelly said an update of the inflation weights was due in 2022 but the surveys needed to be undertaken before that.
“There is no ways we will have the data on a new basket [by 2022]. We will be outside the five-year window period.”
The five years is an IMF requirement for member countries. Though compliance is voluntary, IMF members commit to the standard and it is helpful for IMF members who intend to access international capital markets because it provides surety for international investors of the reliability of a country’s statistics.
The weights are used to determine the inflation basket, which is a fixed set of goods and services. The rise and fall of prices are used to calculate the rate of inflation, which the Reserve Bank relies on in determining interest rates.
The inflation weights that Stats SA uses are based on a survey that was conducted during the 2014/2015 financial year. Weights reflect spending patterns of the households covered by the index.
The survey is also used for monitoring changes in poverty levels and informs the structure of the final household consumption expenditure component of GDP.
The Treasury said: “We are currently busy with a process that will inform the 2020 budget, and Statistics SA and other government departments have submitted budget inputs including requests for additional funding”. These requests were currently being assessed and the outcome would be announced in the 2020 budget.
While it awaits funding, Stats SA is considering using information collected for GDP, which broadly mirrors CPI weights. This is called a “partial weight update” but it is not adequate to inform the selection of items for a new CPI basket, Kelly said.
Before 2008, the inflation basket contained 800 items, but has shrunk to 359.
Technology is among the prominent items in the basket because of cheaper cellphones and tablets.
Convenience cooking has resulted in the inclusion of frozen pizza and instant noodles in the inflation basket, whereas samp, which takes long to cook, has fallen out. Staples such as pasta and rice have gained a larger weighting in the basket.
Levies applicable to sectional-title property are also on the latest list, reflecting the changing lifestyle of South Africans.
This week Stats SA data shows inflation slowed to 4% in July from 4.5% in June, the lowest level in six months. Food prices have moderated but administered prices such as for electricity and water remain high.
FNB economist Siphamandla Mkhwanazi said the discrepancy between the deceleration of inflation data and the inflation experienced by consumers was because headline inflation tracked the change in the price of a representative basket of consumer goods and services. But consumers’ personal baskets may not necessarily be the same.
Lower-income households allocate almost half of their monthly spending to food, while upper-income households tend to spend more on utilities, cars and fuel.
“Thus, a price shock in one variable, say food prices, will have a varying impact on consumers across income groups, depending on how big an item it is in their respective wallets,” Mkhwanazi said.
“Middle-income consumers have typically faced inflation of around 4% this year,” he said. “This is considerably lower than where it was in the same period a decade ago, when it averaged around 11%. It is also much lower compared to 2016, when food prices rocketed as a result of the drought.”
But higher unemployment, the weak economy and low wage growth are contributing to constrained consumer demand. This was evident in persistently low retail sales readings, which have been consistently below CPI levels this year.
FNB forecasts inflation to average 4.2% in 2019 — against the Bank forecast of 4.4%.
“Notwithstanding the muted domestic demand, we expect the economy to avoid slipping into recession. Nevertheless, we expect growth to remain very low this year, and somewhat recover over the next two to three years,” Mkhwanazi said.
We expect growth to remain very low this year, and somewhat recover over the next two to three years Siphamandla Mkhwanazi FNB economist