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Blog: 31 January 2017 (CPI basket weight changes)
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Statistics South (Stats SA) update the CPI basket of goods and services and their weights once every 3-5 years. This vary's depending on when Stats SA runs an Income and Expenditure survey (IES) or a Living Conditions Survey (LCS). As these survey's serves as the main input into the CPI basket.
The international norm is to update CPI basket weights and items once every five years in order to ensure the basket of goods and services priced tracks price movements of goods that consumers are actually buying. No point in pricing stamps when no one buys them anymore. Or cassette players when modern day technology has moved to Ipod's and music available on most smart phones. So how has South Africa's consumer spending patterns changed over the last couple of years? We take a look. |
The graphic below provides a flow diagram showing the 12 main expenditure groups on the left hand side, and the Ranking of these within consumers' expendituure. The higher the ranking the more money consumers spend on a specific group. These groups are classified based on the coding system called COICOP. COICOP is the acronym for classification of individual consumption according to purpose.
From the flow diagram its clear, Group 4 called "Housing" is the main group South Africans spend their money on. Essentially housing is the single biggest item consumers in South Africa spend their money on. In 2016 this group contributed 24.62% of total spending in All Urban Areas (AUA). Basically for every R100 spent by consumers in AUA R24.62 goes towards items in the Housing category (22.56% in 2008 and 24.52% in 2012). This group has carried the biggest weight in CPI's basket in 2008, 2012 and in the new basket for 2016.
In the new CPI basket based on 2016 weights Food and Non Alcoholic Beverages (NAB) is the second biggest category South African consumers spend their money on. In 2008 and 2012 CPI baskets it was the third biggest group. It has therefore moved up in relative importance. The reason for this is due to sharp price increases seen in Food and NAB over the last couple of years. Demand for Food and NAB is relatively inelastic (I.e people wont stop buying food if prices increase, since it is an essential good). In 2016 Food and NAB carries a weight of 17.24% in AUA. Therefore for every R100 spent in AUA's of South Africa, R17.24 goes towards Food and NAB (15.68% in 2008 and 15.41% in 2012). A strong increase in the weight of Food and NAB has therefore been observed compared to the CPI basket weights in 2012.
Transport which was the second biggest category in 2008 and 2012, has fallen to the 4th biggest category, with its weight falling from 18.8% in 2008 to 16.43% in 2012 and now to 14.28% in 2016. Thus for every R100 spent in AUA's, R14.28 is spent on Transport related goods and services.
A group that had a strong increase in spending is the Misscelaneous group (this groups includes all different types of insurance such as Health Insurance/Medical Aid, vehicle insurance, building and building content insurance) as well bank charges, funeral costs etc.
In 2008 and 2012 it was the 4th highest group (with weights of 13.56% in 2008 and 14.72% in 2012). In the 2016 basket the weight for the group is now over 15% at 15.05%. Clearly showing over time that South African consumers are spending more and more on this category. As more South African consumers acquire goods (such as cars and houses), the more insurance is required.
The item with the least amount of spending over all 3 different CPI baskets is Health (note this excludes Health Insurance/Medical Aids), with it's weight averaging around 1.4% over the three periods (1.47% in 2008, 1.46% in 2012 and 1.4% in 2016).
A group that had a strong increase in spending is the Misscelaneous group (this groups includes all different types of insurance such as Health Insurance/Medical Aid, vehicle insurance, building and building content insurance) as well bank charges, funeral costs etc.
In 2008 and 2012 it was the 4th highest group (with weights of 13.56% in 2008 and 14.72% in 2012). In the 2016 basket the weight for the group is now over 15% at 15.05%. Clearly showing over time that South African consumers are spending more and more on this category. As more South African consumers acquire goods (such as cars and houses), the more insurance is required.
The item with the least amount of spending over all 3 different CPI baskets is Health (note this excludes Health Insurance/Medical Aids), with it's weight averaging around 1.4% over the three periods (1.47% in 2008, 1.46% in 2012 and 1.4% in 2016).
The most worrying decliner is the group called Household Appliances. This group contains TV's, furniture, stoves, ovens etc. From being the 5th biggest in 2008 to 6th biggest in 2012, it has now fallen to the 7th spot. Clearly showing consumers are under pressure and less money is available for durable goods at home.The full set of weights for the main groups and the three different weight baskets is below.
Description |
2008 |
2012 |
2016 |
Housing, Water, Electricity |
22.56 |
24.52 |
24.62 |
Food and NAB |
15.68 |
15.41 |
17.24 |
Misscelaneous |
13.56 |
14.72 |
15.05 |
Transport |
18.8 |
16.34 |
14.28 |
Alcoholic Beverages |
5.58 |
5.43 |
5.82 |
Recreation |
4.19 |
4.09 |
5.16 |
Household Appliances |
5.86 |
4.79 |
4.35 |
Clothing and
Footwear |
4.11 |
4.07 |
3.83 |
Restaurants and Hotels |
2.78 |
3.5 |
3.09 |
Communication |
3.22 |
2.63 |
2.63 |
Education |
2.19 |
2.95 |
2.53 |
Health |
1.47 |
1.64 |
1.4 |