17 May 12 Focus on food inflation – the poor get whacked
The poorest 30% of SA’s population now spend almost 39% of their income on food, up from almost 34% a year ago, according to the National Agricultural Marketing Council’s quarterly food price monitor.
A comprehensive report in the Financial Mail notes that the inflation rate for food has consistently outstripped headline inflation since March last year, mainly hurting the poor, who spend a greater proportion of their income on food.
The National Agricultural Marketing Council’s quarterly food price monitor has found that the poorest 30% of SA’s population now spend almost 39% of their income on food, up from almost 34% a year ago. By contrast, the wealthiest 30% spend on average just 3,1% of their income on food, up from 2,7% a year ago. The price monitor also shows that food inflation is higher on average in rural areas.
In the council’s most recent study, done in February, rural consumers were found to have paid 15% more for a food basket than their urban counterparts. Reasons include less competition among retailers in rural areas and transport costs arising from the fact that most food processing plants are in urban areas.
Inflation for food and non- alcoholic beverages eased to 8,6% y/y in March, which is still well above the 6% y/y for headline inflation but down on the 11,1% peak in December.
It follows a modest 0,3% monthly increase in prices in March and comes on the heels of decreases in food inflation in the two previous months.
Food contributes almost 15% to overall inflation, the third-highest weighting after housing & utilities (23%) and transport (19%).
Statistics SA’s figures show that inflation for bread and cereals, at 11,3%, was among the highest of the categories in the basket used to measure food inflation. At almost 22% these products have the second-highest weighting in the basket, after meat.
SA is traditionally a net importer of wheat, but many observers have said this situation is unnecessary and have urged government to revisit legislation on incentives for growing the crop, import duties and other related issues.
Meat prices — 32% of the food inflation basket — were 9,1% higher than a year ago. However, a recent decrease in meat prices is set to continue for a few months more and should contribute to easing in food inflation.
Other food categories showed increases close to the average food inflation rate of 8,6%, though fruit prices increased by just 0,6% y/y and vegetables by 5,9% y/y.
National Agricultural Marketing Council head Andre Jooste warns that falling food inflation figures do not necessarily mean that food prices will not increase.
“The latest figures mean that food prices have increased by 8,6% in the year since last March, which is still very high. It is a comparison of a basket of prices between then and now.”
While analysts say SA’s food inflation has peaked, Jooste says it only means the rate of increase is now slowing…..
Financial Mail: Read the full article
From January next year SA will boast a new-look consumer price index (CPI) that better reflects the burden on households from the steady upwards march in food, electricity, fuel and other administered prices over the past few years.
Given that larger weights are likely to be attached to these items — currently the main drivers of headline inflation — the new CPI basket could bias headline inflation upwards.
But South Africans don’t need to wait for the official statistics to catch up to know that living costs are soaring….. Financial Mail