Comments: Comments: A A South South African African Perspective Perspective
May 2009
Introduction Introduction … … • South Africa has an inflation-targeting monetary policy framework. The continuous inflation target range for the year-on-year increase in the headline CPI (CPI for all urban areas) is 3 to 6 per cent. • In 2007-08, policy had to deal with the continuing pass-through of inflation pressures from a succession of international food and energy price shocks, developments in domestic electricity prices, and from the foreign-exchange rate of the rand
Consumer Consumer price price inflation: inflation: Targeted Targeted inflation* inflation* 13,6% Aug
8,5% March
Per cent and percentage points
Inflation Inflation targets targets and and outcomes outcomes as as at at March March 2008 2008 12
12
10
10
8
8
6
6
4
4
2
2
0
0 UK
Turkey
Thailand
Sweden
South Africa
Romania
Poland
Philippines
Peru
Norway
New Zealand
Mexico
Korea
Israel
Indonesia
Iceland
Hungary
Czech Rep.
Colombia
Chile
Canada
Brazil
Australia
Inflation target range or tolerance limit
Inflation as at March 2008
Targeted Targeted inflation* inflation* and and food food inflation inflation
14,9% March
The The effect effect of of food, food, petrol petrol and and electricity electricity prices prices on on CPIX CPIX inflation inflation
Weights, Weights, sticky sticky prices prices and and parity parity pricing pricing … …
• Going beyond the macro perspective ¾
The CPI and the weighting of food
¾
Stage of processing
¾
Import and export parity pricing
Comparison Comparison of of the the category category weights weights of of the the inflation inflation target target measures measures Per cent
Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear Housing and utilities Household contents, equipment and maintenance Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous Source: Statistics South Africa
CPIX (metropolitan and other urban areas)
CPI (all urban areas)
26,92 3,05 4,06 15,55
15,68 5,58 4,11 22,56
8,37 6,13 15,01 3,19 3,79 3,77 10,16
5,86 1,47 18,80 3,22 4,19 2,19 2,78 13,56
Comparison Comparison of of the the category category weights weights in in the the headline headline CPI CPI inflation inflation measure measure Per cent
Expenditure Group Total Very low Low Middle High Very high Food and NAB Food
15,68 14,27
Source: Statistics South Africa
39,96 37,45
35,80 32,84 33,25 30,45
24,95 10,25 22,93 9,17
Food Food prices prices in in the the PPI PPI and and CPI CPI
Parity Parity pricing: pricing: Maize Maize prices prices
Concluding Concluding comments comments … … responses responses • Monetary policy: Flexible inflation targeting and exogenous shocks • Other: Integrated Food Security Strategy (IFSS); National Treasury (2002); Competition Commission (2002); Food Pricing Monitoring Committee
Headline Headline and and food food inflation inflation in in selected selected countries countries Per cent
Country China: Euro area: Hungary: Indonesia: Japan: New Zealand: South Africa: Tanzania: United Kingdom: United States: Venezuela:
Headline Food (33,6) Headline Food* (15,6) Headline Food (20,7) Headline Food (42,3) Headline Food (27,3) Headline Food (17,4) Headline Food** (21,0) Headline Food (55,9) Headline Food (9,0) Headline Food (13,9) Headline Food*
Note: Weight of food prices in CPI in brackets * Food and non-alcoholic beverages ** Food excluding soft drinks Sources: Bloomberg and national statistical agencies
2004
2005
2006
2007
3,9 10,0 2,2 1,0 6,7 11,6 3,5 11,0 0,0 0,9 2,3 0,8 1,4 2,3 4,9 5,9 1,3 0,7 2,7 3,4 21,7 25,0
1,8 2,9 2,2 0,7 3,6 11,6 2,1 11,2 -0,3 -0,9 3,0 1,4 3,4 2,2 4,4 5,9 2,0 1,5 3,4 2,5 16,0 25,1
1,5 2,3 2,2 2,3 3,9 11,5 13,1 11,6 0,3 0,5 3,4 3,0 4,7 7,2 6,2 8,0 2,3 2,5 3,2 2,4 13,7 25,6
4,8 12,4 2,1 2,7 8,0 11,5 6,5 11,4 0,1 0,3 2,4 3,9 7,1 10,3 7,0 7,0 2,3 4,5 2,8 4,0 18,7 26,0
Contributions Contributions to to CPI CPI inflation inflation Percentage change over twelve months* and percentage points
Total* Of which: Food and NAB Alcoholic beverages and tobacco Housing and utilities Health Transport Education Miscellaneous goods and services Other
2009 Mar
Jan
Feb
8,1
8,6
8,5
2,4 0,6 2,1 0,1 0,0 0,2 1,4 1,3
2,4 0,6 2,0 0,1 0,3 0,2 1,6 1,4
2,3 0,6 1,8 0,2 0,2 0,2 1,6 1,6
* NAB: Non-alcoholic beverages Source: Statistics South Africa
The The effect effect of of food, food, petrol petrol and and electricity electricity prices prices on on headline headline inflation inflation Percentage change over twelve months
Headline CPI CPI excluding petrol prices CPI excluding food and NAB* prices CPI excluding food, NAB and petrol prices CPI excluding food, NAB, petrol and energy prices * NAB: Non-alcoholic beverage Source: Statistics South Africa
Jan
2009 Feb
Mar
8,1 9,1
8,6 9,5
8,5 9,5
6,6
7,4
7,5
7,8
8,2
8,6
7,3
7,8
8,0