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There are some significant flaws in the Consumer Price Index. Not mathematically,
but rather that the CPI, in its attempts to illustrate year on year price differences,
currently at 5.5%, adopts a one size fits all approach. Whilst acknowledging the
difficulties facing statisticians -
To measure inflation, the prices of a selection of consumer goods are mathematically weighted after considering their relative importance. According to a recent article published in the Financial Mail, our current weighting is based on a 2005/06 profile. Under normal circumstances this would be acceptable but in this case, the index allocates only 4.99% for administration services, including electricity, water, municipal services and property rates.
If you’re a suburban resident, either as a property owner or tenant, you will know
that the average annual increase applying to these service items, is well into double-
The reality is that consumers have been exposed to difficult economic circumstances since the onset of the banking crisis in 2008. The burden for most consumers is exacerbated in certain situations with employers; pension schemes and state departments using the understated CPI as a basis for increases rather than a more realistic measurement.
THIS WEEKS TIP
According to Stephen Venter of MDB credit solutions, South Africans are driving themselves further into debt in order to maintain their standard of living. This, and delving into savings, is both inadvisable and readers are advised to adjust their spending patterns rather than to increase debt.
The CHILLI AWARD this week goes to the Eastern Cape politicians and their immediate families who, as reported in the PE Herald, enjoyed personal benefit from R1 billion of tenders during the past financial year.
Ms Barbara Wiggill lost her driver’s license while shopping in Beacon Bay. This week’s CHERRY AWARD goes to the SA Police services who went out of their way to drop this off after it was handed in. Well done for going that extra mile.