The Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products. Changes in the CPI record the rate of inflation. The CPI can also be used as a cost-of-living index.
HOW IS THE CPI MEASURED?
The prices of goods and services consumed by South Africans are used to calculate an inflation rate for the whole economy. But not all South Africans consume the same goods or services, nor do they consume them in the same proportions. The CPI therefore cannot measure the way individual households experience inflation, or how they spend their money. As a result, the inflation rate is based on the estimated total expenditure of all South African households.
The estimated total expenditure is determined by the Income and Expenditure Survey (IES), a national survey in which households are asked detailed questions about what they spend their money on. The results of this survey provide a picture of the expenditure of an “average” South African household. This expenditure pattern is then used to determine which items are included in the basket of goods that is used to determine the CPI, as well as how much weight a particular item carries.
HOW DOES STATS SA DETERMINE WHAT GOES INTO THE BASKET OF GOODS?
There are two criteria used when determining what goes into the CPI basket – total expenditure on the item and the number of households purchasing the item. This is to ensure that expensive items which are bought by a few households (e.g. musical instruments, boats, etc), or which are purchased often but are so cheap their weight would be insignificant (e.g. matches) are not included in the basket.
IS THERE ONLY ONE BASKET FOR THE WHOLE COUNTRY?
There are CPI baskets for each province, as well as each primary urban area, secondary urban area and rural area. All unique items that appear in the provincial baskets appear in the national basket. There are currently 393 items in the basket.
HOW ARE THESE PRICES COLLECTED?
Stats SA has a permanent staff appointed as price collectors. These staff visits sampled outlets and markets on a monthly basis in order to record actual prices on the shop floor. Staff at the Head Office in Pretoria collect information on prices for services, using a variety of methods.
This information is then used to calculate the Consumer Price Index.