Inflation drops to 11.8%

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Inflation drops to 11.8%

Statistics SA released their inflation statistics for November today.

The new figure has come in at 11.8% which bodes well for the future of our economy in 2009.

The Stats SA report can be found here and these are some of the salient points.

The headline inflation rate (year on year) dropped 0.3% from Octobers 12.1%. The main drivers of this fall were transport costs which dropped from 17.55 in October to 14.5% in November; this can be attributed to the lower petrol price.

However some areas' costs are still growing faster than the averaged rate of inflation.

Food has an inflation rate of 16.6% whereas non-food items are only growing at 10.2% in metropolitan areas. This is a drop of 0.5% compared to October 2008 for non-food items.

Inflation hit a peak of 13.7% in August and has declined every month since. It appears that the Reserve Banks inflation strategy if finally paying off and we can expect further interest rate cuts next year.

This is great news as it signals that our economy is ready to come out of the doldrums, numerous government initiatives, such as the National Credit Act and interest rate hiking, are taking effect and our economy should be nicely poised to take full advantage of the 2010 world cup.

There were only a few predictions of what the inflation rate would come in at. Nedbank as reported in The Dispatch were of the opinion that inflation was expected to ease off for the third consecutive month in November. They believed that this was fuelled by the drop in the price of petrol and lesser food prices. They predicted 11.9% which was only 0.1% off the mark. The article also carried a quote by Tito Mboweni that 'inflation was expected to average 6.2% and 5.6% in 2009 and 2010 respectively, and to average 5.3% in the final quarter of 2010'.

Just because inflation is dropping is no reason to go shopping crazy though.

Rather use our budget calculator to stay within your means. Don't forget that food is getting more expensive quicker than anything else, so this season might not be the right one for turkey, ham and all the trimmings.

If you are feeling the pinch you should rather contact a debt counsellor now rather than wait for an even larger hangover in the New Year. The global credit crunch is still kicking and while we appear to be fairly decoupled from worldwide issues, we should rather tend towards the conservative and wait for inflation to fall faster before we splurge out and shoot ourselves in the foot.

All in all however some very positive news from Statistics SA.