On Wednesday, just before the July CPI numbers were released, I wrote a post about all the many inflation rates: Not All Inflation Is Created Equal. And then yesterday, this was popping up all over South African Twitter:
I wanted to give you an extract from the new July numbers:
The thing is: food price inflation is almost double headline inflation.
And if you’re wondering why that is: fortunately, yesterday, the PPI numbers were released. The “Producer Price Index” tracks the change in the cost of producing the products that we buy (those same ones that sit in the Consumer Price Index, and/or headline inflation).
Here’s a similar extract from the July PPI report:
So the cost of food production is up – way up, in fact. And that’s just local food production. For whatever we’ve imported, we’ve had to deal with the depreciation of the Rand.
Again, part of that is the drought driving up raw food costs. But there are also electricity hikes and so on – and someone has to pay for them.
And that someone is generally ‘us’ – because the costs have to get passed on to the consumer. Producers will only suffer so much of a margin squeeze before they either:
- Increase prices; or
- Stop producing.
On that happy note, have a great weekend.
Over and out.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.