An Analysis of CPI Over the Festive Season

Statistics South Africa (STATS SA), defines the Consumer Price Index (CPI) as a measurement of the “monthly changes in prices for a range of consumer products,” [1]. The prices of a set group of commodities and services, called “the basket of goods”, are monitored monthly. These changes are used to calculate the CPI; in turn, “changes in the CPI record the rate of inflation,” [1]. The CPI is also a reflection of the country’s cost-of-living.

Currently, the CPI value is 104.1, [1]. However, this number means nothing by itself. To evaluate the CPI value, it is necessary to compare it to a base period. Currently, the CPI base period is set as December 2016 which has a CPI of 100. From this, we can see that the CPI has increase a total of 4.1% since December 2016. This period is reset every few years to a CPI of 100.

When analysing CPI history, certain trends can be observed. In Figure 1 below, the most prominent trend is the three peaks that form over the December to March period.

Figure 1

The blue lines and markers on Figure 1, represent the month-on-month percentage increases of the CPI. Over the last three years, we’ve only seen a decrease in CPI twice; and no change in three instances. The rest of the markers all represent an increase in CPI from as little as 0.1% to as much as 1.4%.

Building on the month-on-month increases, the red line of Figure 1, represents a continuously increasing CPI, the average trend of which is indicated by the dark grey dotted line.

Note: It is important to remember that the CPI was reset to 100 in December 2016 – indicated by the light grey line and marker. This is important, as it might appear that during the period October 2014 – November 2016, the CPI was under 100. According to STATS SA, it is necessary “to rebase the CPI periodically to avoid distortions that build up over time,” [2]. That said, the trend line still follows accurately from pre- to post-rebase.

As mentioned above, three peaks are particularly noticeable – obviously due to the high month-on-month increase in CPI each year during the Festive Season.

During the Festive Season, we find an increase in pricing over a range of goods and services. This causes the peaks and can affect both the year-on-year CPI value and inflation. Despite steeper than usual increases in prices, sales in certain industries increase as well. Retrospective analyses of the Festive Season period by STATS SA offers insights into which industries are affected most by sales [3]:

  • With the Annual Builder’s Break from 15 December 2017 to 08 January 2018 [4], it’s no surprise that sales in the hardware industry are negatively affected.
  • The same applies to the textile, wood, metal, and other industries, when manufacturers take their annual breaks.
  • Road trips and camping are iconic South African holiday activities. Fuel sales, bus sales, and camping all enjoy increased revenue during the Festive Season.
  • Hand-in-hand with road trips and camping are food and drink. Braais, parties, picnics, days at the beach, and overall festivities at home and work all drive profits during this time.

The above indicates that, despite pricing increases, South Africans continue to spend during this period.  Several factors could contribute to this:

  • Annual bonuses or increases
  • Social pressures relating to holidays and festivities
  • Familial demands such as entertainment, social gatherings, etc.
  • Annual sales that drive shop traffic and spending on non-sale items
  • Shifts in spending from work-related goods to holiday-related goods
  • Back-to-school preparations in January

The implication for the credit industry is a possible trend for consumers to take out credit that supports the above spending habits, i.e. opening retail accounts, cell phone accounts, etc. It’s the silly season, and consumers are driven by retail advertising and the social pressures the Festive Season. And while spending is good for the economy; the possible Festive Season-related irresponsible borrowing can affect economic elements such as inflation and cost-of-living.

[1] Statistics South Africa. (2017). Consumer Price Index – October 2017 [Electronic]. Pretoria: Statistics South Africa. Available: [01 December 2017 ]