Basket case for rates

The prices of nearly 400 products and services - from everyday groceries to once-in-a-lifetime purchases - will have the largest influence on whether the interest rate rises today.

The Reserve Bank has kept the interest rate on hold since January, and 14 out of 27 economists polled by Bloomberg expect governor Gill Marcus to keep it unchanged when she announces the monetary policy committee's decision today.

The 393 items are the goods in the representative basket of the Consumer Price Index (CPI).

The Reserve Bank uses adjustments to the interest rate to try and keep inflation within the target band of 3% to 6% per year. The CPI is how inflation for the regular Joe is measured.

May's CPI showed that food prices rose by 9% compared with a year ago and vegetables, in particular, were 13% more expensive.

Overall, the CPI climbed 6.6% year-on-year, the second month it has breached the upper limit of the Reserve Bank's target.

Though consumers might feel the squeeze and think prices are increasing quicker than 6.6% per year - at least for them - this is not the case, said Patrick Kelly, executive manager of price statistics at Statistics SA

StatsSA divides the population into five groups - quintiles - based on income.

Though the weight of the spending is between quintile four and five - which is at an income level of about R142 000 per year and probably best represents the working to middle class - Kelly said all South Africans experienced more or less the same inflation.

"There is no evidence to suggest that any income group experiences inflation significantly differently from the others," said Kelly.

While we notice petrol price increases - the price is set to go up by 26c a litre next month if the rand and oil price stay at current levels - some of the products that become more affordable fly under our radars.

"Owners' equivalent rent, the largest single contributor to the CPI (representing 11.5%), increased by only about 5% on a year ago."

The prices of telecommunications equipment dropped by 11.4%, and cellular rates were flat, according to Kelly.

StatsSA has about 100 field workers spread over 25 areas in the country to collect pricing data during the first three weeks of the month.

The products in the basket are not set in stone.

Kelly said StatsSA's income and expenditure survey adds - or removes - goods from the basket from time to time.

"Starting from last year, we don't only look at instant coffee, we now have filter coffee too," said Kelly.

He said iPads and tablets have been introduced to better track the personal computer category.

Samp has been taken out as South Africans consume less and less of this staple. It now accounts for less than 4% of the consumption of maize and related products.