An analysis of the accuracy of South Africa’s inflation figures since 1922

26 October 2015
Publication Type: Working Paper
JEL Code: N1, N27

This paper assesses the accuracy of South African inflation data since 1922, the earliest date from which comparable price level and inflation data is available for South Africa. Historic prices recorded for 1922, 1974 and 2006 are adjusted in accordance with the rate of increase in the consumer price index (i.e. the inflation rate) and relevant sub-indices of the consumer price index in one instance since those dates and compared to current prices of these items. In this way it is assessed whether actual prices increased slower or faster than the rate of inflation. The findings are that prices increased broadly in accordance with the inflation rate since 1922, but that distortions occurred since 2006. The conclusion is that the rate of inflation underreports price increases since 2006. As the prices available for comparative purposes (in the main food and clothing prices) carry a comparatively higher weight in the expenditure basket of the low income group, the implication is that the poor suffers as a consequence of sustained and underreported inflation. The analysis in this paper provides justification for a lack of inflation credibility and perceptions that historic price increases exceed price increases reported by the rate of inflation. This finding implies that an independent reassessment is required to ascertain the accuracy of inflation figures in reporting price increases over time.

Series title: Working paper 556
1 October 2015
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