lesson

Subindices of the CPI

After you have worked through this section of the learning unit, you should be able to

distinguish between the different subindices
calculate rates of inflation and identify changes for the different subindices
distinguish between administered price and regulated price

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Study Instructions

Study chapter 6.5 of the textbook.

Do the activities.

Introduction

3 The rate of inflation, measured by month on same month of previous year, for April 2020 was the highest for the lowest decile expenditure group.

True

Correct. The statement is indeed true.

According to table A in the Statistical Release P0141, Consumer Price Index April 2020, the rate of inflation for expenditure group 1, which is the lowest expenditure group, was 4,1%, which is the highest inflation rate for the expenditure groups.

False

Incorrect. The statement is true.

Questions 4 and 5 are based on data in the Statistical Release P0141, Consumer Price Index April 2020. and the following:

South Africa’s Covid-19 lockdown began on 26 March 2020. For the whole of April 2020 the country was on a lockdown level 5. Based on month on same month of previous year, the inflation rate for March 2020 was 4,1%. For April 2020, based on month on same month of previous year, the inflation rate was 3%. Using seasonally unadjusted data for CPI the percentage increase from March 2020 to April 2020 was –0,5%.

4 The contribution of food and non-alcoholic beverages to the annual percentage change in headline CPI for March 2020 was 0,7%.

True

Incorrect. The statement is false.

The contribution of food and non-alcoholic beverages to the annual percentage change in headline CPI for March 2020 was 0,7 percentage points, not 0,7%. See table C.

Insert video clip

False

Correct. The statement is indeed false.

The contribution of food and non-alcoholic beverages to the annual percentage change in headline CPI for March 2020 was 0,7 percentage points, not 0,7%. See table C.

Insert video clip

6 In terms of food prices for April 2020, based on month on same month of previous year, the biggest increase was for fruit, the lowest increase was for fish and the biggest decline was for vegetables.

True

Correct. The statement is indeed true.

Fruit increased by 9,1%, fish increased by 2,8% and vegetables declined by -0,1%. See table E.

Insert video clip

False

Incorrect. The statement is true.

Fruit increased by 9,1%, fish increased by 2,8% and vegetables declined by -0,1%. See table E.

Insert video clip

7 For April 2020 the CPI for the Western Cape was 117,6 and for the Free State it was 114,2. From this information you can conclude that the general price level in the Western Cape is higher than that in the Free State.

True

Incorrect. The statement is false.

The publication of separate CPIs for the different geographical areas enables us to compare the increase in prices and not the difference between the cost of living.

False

Correct. The statement is indeed false.

The publication of separate CPIs for the different geographical areas enables us to compare the increase in prices and not the difference between the cost of living.

8 Complete the table by calculating the average annual growth rates for the period 2010 to 2019.

	Goods		Services
Year	KBP7145J Food and non-alcoholic beverages	KBP7151J Transport	KBP7160 Household and utilities	KBP7162 Health
2010	63,7	76,6	71,2	68,8
2011	68,2	79,8	74,9	73,4
2012	73,1	83,2	78,6	78,1
2013	77,2	91,0	82,9	83,0
2014	83,1	96,8	87,4	88,1
2015	87,4	93,5	92,1	93,8
2016	96,6	97,7	97,2	99,5
2017	103,3	103,3	102,4	105,9
2018	107,0	111,5	107,5	112,4
2019	110,7	114,7	111,8	118,5
Average annual growth rates (2010 to 2019)

	Goods		Services
Year	KBP7145J Food and non-alcoholic beverages	KBP7151J Transport	KBP7160 Household and utilities	KBP7162 Health
2010	63,7	76,6	71,2	68,8
2011	68,2	79,8	74,9	73,4
2012	73,1	83,2	78,6	78,1
2013	77,2	91,0	82,9	83,0
2014	83,1	96,8	87,4	88,1
2015	87,4	93,5	92,1	93,8
2016	96,6	97,7	97,2	99,5
2017	103,3	103,3	102,4	105,9
2018	107,0	111,5	107,5	112,4
2019	110,7	114,7	111,8	118,5
Average annual growth rates (2010 -2019)	5,7	4,1	4,6	5,6

The general formula is as follows:

$$
\Biggl[
\Biggl(
\frac{\text{lt}}{\text{lt-k}}
\Biggl)^\text{1/k} -1
\Biggl]
\times 100
$$

For food and non-alcoholic beverages the calculation is as follows:

$$
\Biggl[
\Biggl(
\frac{110,7}{63,7}
\Biggl)^\text{1/10} -1
\Biggl]
\times 100
$$

= (1,738^1/10– 1) x 100
= (1,057 -1) x 100
= 0,057 x 100
= 5,7%

10 Which good or service recorded the highest average annual for the period 2010 to 2019?

Food and non-alcoholic beverages

Correct. The average annual increase for the period 2010 to 2019 for food and non-alcoholic beverages was 5,7%, which is the highest.

Transport

Incorrect. The highest average annual increase was for food and non-alcoholic beverages at 5,7%. For transport it was 4,1%.

Household and utilities

Incorrect. The highest average annual increase was for food and non-alcoholic beverages at 5,7%. For household and utilities it was 4,6%.

Health

Incorrect. The highest average annual increase was for food and non-alcoholic beverages at 5,7%. For health it was 5,6%.

11 Since the highest average annual increase for food and non-alcoholic beverages was the highest for the period 2010 to 2019, it follows that the highest annual increase for 2018 to 2019 will also be the food and non-alcoholic beverages sector.

True

Incorrect. The statement is false.

It is not necessarily the case. The highest annual increase for the period 2018 to 2019 was recorded by the health sector at 5,4%.

	Goods		Services
Year	KBP7145J Food and non-alcoholic beverages	KBP7151J Transport	KBP7160 Household and utilities	KBP7162 Health
2010	63,7	76,6	71,2	68,8
2011	68,2	79,8	74,9	73,4
2012	73,1	83,2	78,6	78,1
2013	77,2	91,0	82,9	83,0
2014	83,1	96,8	87,4	88,1
2015	87,4	93,5	92,1	93,8
2016	96,6	97,7	97,2	99,5
2017	103,3	103,3	102,4	105,9
2018	107,0	111,5	107,5	112,4
2019	110,7	114,7	111,8	118,5
Average annual growth rates (2010 -2019)	5,7	4,1	4,6	5,6
Annual growth rate (2018 -2019)	3,5	2,9	4,0	5,4

The calculation for health is as follows:

$$
\Biggl[
\Biggl(
\frac{118,5}{1112,4}
\Biggl) -1
\Biggl]
\times 100
$$

= 5,4%

False

Correct. The statement is indeed false.

It is not necessarily the case. The highest annual increase for the period 2018 to 2019 was recorded by the health sector at 5,4%.

	Goods		Services
Year	KBP7145J Food and non-alcoholic beverages	KBP7151J Transport	KBP7160 Household and utilities	KBP7162 Health
2010	63,7	76,6	71,2	68,8
2011	68,2	79,8	74,9	73,4
2012	73,1	83,2	78,6	78,1
2013	77,2	91,0	82,9	83,0
2014	83,1	96,8	87,4	88,1
2015	87,4	93,5	92,1	93,8
2016	96,6	97,7	97,2	99,5
2017	103,3	103,3	102,4	105,9
2018	107,0	111,5	107,5	112,4
2019	110,7	114,7	111,8	118,5
Average annual growth rates (2010 -2019)	5,7	4,1	4,6	5,6
Annual growth rate (2018 -2019)	3,5	2,9	4,0	5,4

The calculation for health is as follows:

$$
\Biggl[
\Biggl(
\frac{118,5}{1112,4}
\Biggl) -1
\Biggl]
\times 100
$$

= 5,4%

12 According to data in the Statistical Release P0141, Consumer Price Index April 2020 based on a month on same month of previous year (April 2019 to April 2020), the CPI for administered prices increased more than the headline CPI for the period.

Statistical Release P0141, Consumer Price Index April 2020.

True

Incorrect. The statement is false.

CPI for administered prices increased by 0,9%, whereas headline CPI increased by 3%. See table A.

Insert video clip

False

Correct. The statement is indeed false.

CPI for administered prices increased by 0,9%, whereas headline CPI increased by 3%. See table A.

Insert video clip.

Concepts

Regulated prices

Those administered prices that are monitored and controlled by government policy. Examples are products and services such as water, electricity, paraffin, petrol, diesel, telephone fees and cell calls.
Administered prices

The prices of products which are set consciously by an individual producer or group of producers and/or any prices which can be determined or influenced by government, either directly or through a government agency/institution without reference to market forces. Examples are assessment rates, water, electricity, paraffin, petrol, diesel, public transport – trains, motor vehicle licences, motor registration, telephone fees, cell calls, television licences, school fees.

Glossary

lesson

Subindices of the CPI

Study Instructions

Introduction