Consumer Price Inflation Rises - Quick Consolidation Loans

Consumer Price Inflation Rises

Consumer Price Inflation Rises

Stats SA Releases CPI Data

Data released by Statistics South Africa this month shows that consumer inflation has risen to 6.2% year-on-year. In December, consumer inflation was at 5.2%.

Prices increased by 0.8% month-on-month, as opposed to a rise of 0.3% last month.

Core inflation, which discounts food, non-alcoholic beverages, energy and petrol prices, crept up to 5.6% year-on-year in January, from 5.2% in December. Moreover, increasing to 0.7% month-on-month.

A Reuters poll placed January headline consumer price inflation (CPI) at 5.93%.

There was a forecast breach of the 3-6% target band, averaging 6.1%. Thereafter, the inflation rate is anticipated to temper, at an average of 5.8% for 2016.

Low statistical base factors could be to blame for the first quarter breach.

Impact on Households

We can expect subdued domestic demand from the January CPI data, especially for discretionary items. Household purchasing power is being corroded by interest rate hikes, hitting highly indebted households the hardest. This, on top of rising food and petrol prices. 78% of household income is currently spent on debt.

The Finance Minister announced in the Budget Speech 2016 that tax would be rising, while the jury is still out on whether Nersa will approve Eskom’s request for an electricity tariff hike.

In order to preserve market share, service providers and retailers cannot forego price hikes due to the demand environment.

Trading updates from major retailers indicate that the trading environment is particularly challenging at present.

The BER/EY Retail Survey supports this assessment, showing 60% of retailers as pessimistic, with most expecting conditions to only worsen during the first quarter of 2016.

Retail Sales Update

The December retail sales update shows that retail sales increased by 4.1% year-on-year during December of 2015, as opposed to a downwardly revised 3.8% increase in the preceding month.

Household furniture, appliances and equipment showed the highest growth rate at over 7.7%, with textiles, clothing, footwear and leather goods at over 5.8% and general dealers showing a growth rate of over 4.6%.

Overall, sales rose by 3.3% in 2015, lifted by textiles, clothing, footwear and leather goods, and general dealers.

Retail sales dropped by 0.9% monthly. For 2003 – 2015, retails sales averaged 4.97% year-on-year, hitting an all-time high of 15.5% in September 2006, and a record low of -6.2% in April 2009.