I struggled to find a decent data-set of past economic indicators off the web. I’m sure there’s an easier way, but I had to trawl the horrible formats of Stats-SA and the Reserve Bank to get the mangled data underlying this graph. Seems like Stats-SA is either deliberately obfuscating their data, or they’re working on systems from the late 80s.
The graphs cover:
- Historical Consumer Price Index (CPI) inflation
- Historical Producer Price Index (PPI) inflation
- Historical CPIX, albeit for a much shorter period since this index was created in the late 1990s
- Banks Prime rate of interest starting from 1980. This is the major interest rate that affects consumers through house and vehicle finance
- The Reserve Bank’s REPO rate (rate for repurchase agreements with the banks) since inception in 1999.
More analysis to follow on this chart, but in the meantime some brief thoughts:
- Real interest rates appear to be at close to their lowest ever. A period of negative real interest rates in the mid 80s was the last we were in this phase.
- If one considers the rate of interest that most consumers will be able to earn (less than REPO) then it is hardly surprising that consumers choose to consume rather than save at a rate which erodes their capital in real terms every day.
- The period of stable, low inflation for a few years in the middle of this decade appear barely more than a quick breath in amongst a turbulent ride over the past 20-odd years. I suspect the bumpy ride is more like what we should expect as the norm given our commodity-heavy and genearlly poorly diversified, small, emerging economy.
- PPI doesn’t appear to lead CPI as much as some (including me) previously thought
- But more worrying, PPI doesn’t stay much above CPI for most of history. In other words, the typical pattern is for producer costs to be passed on to consumers through price increases rather than through contracting margins or efficiency improvements. Our impressive PPI of 18.9% as measured (seasonally adjusted) in the year to end July 2008 is worrying for future CPI increases.
Of course, this chart tells us nothing about the causes of the cliff-climbing PPI and CPI (primarily oil and food as initial drivers) and how these might change abruptly given the pull-back in oil prices.