Inflation for August slightly up

The annual inflation rate for August 2015 rose to 3.4% from 3.3% as compared to the previous month according to an IJG report.

According to IJG, the increases in the annual inflation rate was driven by the following categories; Transport which increased from -1.8 to -1.4%, Alcoholic beverages and tobacco increased from 6.9 to 7.2%, Housing, water, electricity gas and other fuels increased from 2.1 to 2.4% and Food and non-alcoholic beverages annual inflation rate increased from 5.3 to 5.5%.
On a month on month basis prices rose by 0.3% compared to 0.4% in July. On a year on year basis half the basket categories grew at a faster rate than in July while the other half slowed. Year on year inflation is again well below average, largely due to a drop in the price of oil over the past year, and the knock on effects this has on prices, as well as the heaviest weighted basket item (housing, water and electricity, and gas and other fuels) experiencing prolonged inflation of well below the basket average. 12 month average inflation reached a new low of 3.9%, and has been coming down steadily since November 2014, IJG added.
“On a year on year basis, food and non-alcoholic beverages prices have increased by 5.5%, up from 5.3% in July, largely driven by higher fish, fruit, and meat prices. Alcoholic beverages and tobacco experienced inflation of 7.2% on a year on year basis. Tobacco price increases have been driving inflation in this basket category for the most part in 2015. Alcoholic beverages and tobacco inflation was the second biggest contributor to overall monthly price increases,” IJG said. Meanwhile, IJG said, clothing and footwear prices grew 0.3% year on year and fell 1.4% month on month. As this basket category maintains only a 3% weighting within the total basket it does not present a major drag on the overall inflation figure. Year on year inflation on housing, water, electricity, gas and other fuels increased marginally, posting a figure of 2.4% for August versus 2.1% in July.
According to IJG this was largely due to water supply, sewage services and refuse collection inflation recovering to 9.7% after an uncharacteristic fall to 5.4% in July. Once again rental payments for dwellings (both owners and renters) have experienced inflation of only 1.5% on a year on year basis, and have not increased on a month on month basis. This basket category was however the largest contributor to overall monthly inflation, largely due to its heavy weighting in the basket and not the magnitude of price increases in the category.
“Transport costs were the third largest contributor to monthly cost increases as prices rose 0.3% during August. On a year on year basis transport costs were still down 1.4%, driven by lower fuel prices. A weak rand as well as volatile oil prices could lead to fluctuations in this basket category for a while to come still,”IJG added.
“We continue to expect inflation to pick up towards year end as the full benefit of cheap oil is reach and the weak currency causes import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco, as well as housing costs,” IJG said.