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Blog: 2 Oct 2017 (SA's poor inflation half than that of the rich. We asked the Stats office why)
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In today's blog we provide feedback provided by Statistics South Africa (Stats SA) regarding the inflation of the poor being less than half of that of the rich. Yet the major spending item for the poor (which is food) increased by amounts far greater than the overall level of inflation of the poor. So how come the poor's inflation is so low if such an important item in their spending (food) is increasing at much higher rates? We asked the Stats office about this and below is their response.
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Inflation per income group
Inflation per expenditure decile. Decile 1 represents the poorest 10%, while Decile 10 represents the richest 10%
So the graphic above shows South Africa's inflation based on the expenditure groups. Decile 1 represents the poorest 10% of households, while Decile 10 represents the richest 10% of households. And in our previous article we queried why the poor's inflation would be so low when one of their main spending items (food) is increasing at rates FAR higher than the inflation rate experienced by the poor. So we put the question to Stats SA. And below is their response.
Dear John
Thanks for your mail.
Although the weight for food and NAB for decile 1 (48.13) is almost 5 times the weight in decile 10 (10.74) the individual products which the “poor” spend their money on are the products with much lower inflation, such as bread, maize meal, chicken portions against the products in decile 10 such as the more expensive meat cuts and pastry products.
The inflation rate in decile 10 is mostly driven by education and miscellaneous goods and services which covers the insurance category especially health insurance. Below is a table with the weights and the contributions to the inflation rates of the two decile groups for August 2017.
Thanks for your mail.
Although the weight for food and NAB for decile 1 (48.13) is almost 5 times the weight in decile 10 (10.74) the individual products which the “poor” spend their money on are the products with much lower inflation, such as bread, maize meal, chicken portions against the products in decile 10 such as the more expensive meat cuts and pastry products.
The inflation rate in decile 10 is mostly driven by education and miscellaneous goods and services which covers the insurance category especially health insurance. Below is a table with the weights and the contributions to the inflation rates of the two decile groups for August 2017.
So essentially what they are saying is that the prices of food items the poor are buying are increasing at a slower rate than those items that are purchased by the rich. And in addition to this inflation of the rich was being driven by miscellaneous goods and services, which is largely made up by all the various types of insurance, from health insurance (medical aid), to vehicle and building and household content insurance. And these are the type of services the poor can hardly afford. In fact our next question to Stats SA will be to supply weights per decile for both goods and services purchased. As we suspect the poor hardly uses any services and this will be dominated by the rich.