Looking at South Africa's latest inflation numbers in more detail
Category: Exchange rate, economics, finance
Date: 6 July 2022
Date: 6 July 2022
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We take a look at South Africa's poorly performing exchange rate against the US dollar since May 2021. And it does make for pretty sad reading.
A weaker exchange rate has significant consequences for South Africa's as all imports including crude oil used for petrol becomes more expensive. |
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So lets take a look at the latest consumer price index (CPI) numbers for South Africa in more detail. The rates shown below all shows year on year inflation rate increases (unless specified otherwise). We will start off by looking at the inflation rate for the major project categories in the South African consumer price index basket of goods and services:
Major product categories:
Major product categories:
- Food: 7.8%
- Non-alcoholic beverages: 4.9%
- Alcoholic beverages: 7.4%
- Tobacco: 5.4%
- Clothing: 1.7%
- Footwear: 1.8%
- Housing and utilities:4.9%
- Household contents and services: 4.3%
- Health: 4.9%
- Transport: 15.7%
- Recreation and culture:1.9%
- Education: 4.4%
- Restaurants and hotels: 6.2%
- Miscellaneous goods and services: 3.9%
- All Items: 6,5
Weaker exchange rates does have a downs side to them though. If you are a firm importing goods and services a weaker exchange rates means the goods and services becomes more expensive. Think about car importers. As the exchange rate weakens the price of new vehicles will go up as the cost of buying and importing these will increase. And then there is the import duties government slap on imported goods further pushing up prices of imported goods.
Currently the biggest impact of a weaker exchange rate in South Africa is the fuel price. A weaker exchange rate means crude oil becomes more expensive which means fuel in South Africa becomes more expensive. More expensive fuel means more expensive transport, be it people, goods or services. And this leads to higher costs for logistics and transport firms. They then pass these increases onto their customers such as retailers and wholesalers. And wholesalers and retailers then pass on these increased costs to their consumers. And that is you and me.
So a weaker exchange rate is a good and bad thing, depending on which side you are on.
Currently the biggest impact of a weaker exchange rate in South Africa is the fuel price. A weaker exchange rate means crude oil becomes more expensive which means fuel in South Africa becomes more expensive. More expensive fuel means more expensive transport, be it people, goods or services. And this leads to higher costs for logistics and transport firms. They then pass these increases onto their customers such as retailers and wholesalers. And wholesalers and retailers then pass on these increased costs to their consumers. And that is you and me.
So a weaker exchange rate is a good and bad thing, depending on which side you are on.