Reader Q and A: Difference between official and actual inflation rates?
Hi Francois
I need to compare the official and actual inflation rates.
Where do I find information about the actual inflation rate? And what’s the difference?
Regards,
Monica
Hi Monica
You ask a very interesting question.
The official inflation rate in South Africa is calculated by looking at how the Consumer Price Index (CPI) changes over time.
The CPI is made up of goods and services used by the average South African. Examples of items included in the CPI are food, petrol, housing and education.
However, are you an average South African? What is average anyways?
The truth is that each person in South Africa has an unique inflation rate. Your personal inflation rate depends on how the prices of the things that you spend your money on changes.
While the official CPI inflation rate is a good way to measure inflation in South Africa as a whole, it may differ significantly from your personal inflation rate.
The best way to measure your personal annual inflation rate is to carefully record all your expenses for a full year, and then calculate the percentage that you have to pay more at the end of the year, to buy the same items and services that you did at the beginning of the year.
If you don’t keep careful record of your expenses, you can still estimate your personal annual inflation rate by reshuffling the weights of the individual items that make up the CPI. By doing this you’ll be creating your own Personal Price Index.
For example, tobacco products currently make up 2.29% of the CPI. If you’re a non-smoker, you can entirely exclude this figure from your Personal Price Index.
You can find the latest CPI publication here: Stats SA CPI Publications
To see a chart and table of the CPI inflation rates in South Africa, since 1982, you can look here: CPI Inflation Rate in South Africa
Kind regards,
Francois
