Fuel hike puts damper on spending

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Battling consumers will have to tighten their belts this festive season, with the first in a series of fuel price hikes kicking in at midnight on Tuesday.

But economists and consumer activists said most consumers would still take their annual holiday even if it meant cutting back on luxuries such as eating out and movies.

On Friday, the Department of Energy announced a 17 cents increase in the price of petrol and a 10.12 cents increase for diesel.

The price of unleaded petrol inland will increase to R13.19 cents a litre and to R12.82 at the coast.

The maximum retail price of illuminating paraffin will increase by 22 cents a litre while the price of LPG gas will increase by 18 cents a kilogram.

Automobile Association spokesman, Graeme Scala, said consumers were not likely to cancel their annual holidays because of the fuel price increase and some would have budgeted for a price hike.

“But what it will do is put a bit of extra pressure on the average consumer’s pocket,” he said.

“Generally speaking, consumers are hard-pressed and a little cash-strapped, but we did have two recent fuel price decreases.”

Economist Mike Schussler of Economists.co.za said the most recent fuel price increases would not directly cause extreme hardship for consumers although the petrol price was now 9.9 percent higher than it was in December last year, 24 percent higher than in 2011 and 68 percent more expensive than in 2010.

Schussler said consumers should brace for another fuel price hike of between 10 and 20 cents next month.

“It’s not the 17 cents increase that is the straw that will break the camel’s back; it’s the continual onslaught of ever increasing prices,” he said.

“Discretionary spending of South Africans is clearly coming under severe pressure because once people have paid their bonds, their pensions, school fees and medical aid, a lot of the discretionary spending now goes on fuel and the effect of that is going to be felt by the consumer.”

Said Schussler: “We are starting to feel the effect of the increases over the past two to three years in slipping retail sales.”

He said consumers would probably cut back on holiday spending, on luxuries such as restaurants and movies, while others would buy cheaper cuts of meat to save.

‘Tiny amount’

Efficient Group chief economist, Dawie Roodt, said the increase was a “tiny amount compared to the bigger picture” and some retailers had anticipated the fuel price increase and had already priced this into their festive season prices.

However, he said the latest increase and the anticipated hike next month could take anything from a few months to a year to filter through the economy.

“Consumers are going through a really difficult time and it is becoming more and more difficult for retailers and those at the factory gate to pass on price increases,” Roodt said.

Durban Chamber of Commerce and Industry chief executive, Andrew Layman, said he did not expect the local tourism business to be impacted by people cancelling their holidays as a result of the increase.

“It is regrettable, as any increase in the price of fuel affects the economy broadly, but I think in the short term of the festive season it is not likely to make any difference,” Layman said.

SA National Consumer Union vice-chairman, Clif Johnston, said the increase would be a double whammy for Gauteng consumers, who have to pay for e-tolling from today.

“Any administered price increase, such as petrol and tolls, creates expectations and can be a trigger for retailers to raise prices, often by much more than the actual cost impact,” Johnston said.

“But some retailers may take a contrary view in order to benefit from increased sales,” he added.

Johnston advised consumers to shop around, not necessarily by wasting petrol going from shop to shop, but by making use of electronic communications and social media to share pricing information.

“It is usual for retail prices to rise during December as a result of the festive season, and then fall again during January and February. The real impact will probably only become noticeable to consumers from February onwards when prices do not fall by as much as usual, or possibly not at all,” Johnston said.

“In some fast-moving lines, such as fresh milk and vegetables, the effect may come sooner, causing a higher than usual price rise during December.”

Johnston said the consumer union was “very concerned” about the impact of “ever increasing” fuel and toll prices.

“We believe these costs are significantly hampering growth in the country. We believe the time is right for an extensive and open debate on the formula used to set fuel prices, and on the negative aspects of tolling existing roads,” Johnston said.

Independent consumer activist, Ina Wilken, said the combined effect of the fuel hike and e-tolling would set back consumers who were already struggling and who she said appeared to be staying away from shopping centres and special Christmas markets.

“All commodities are going to increase. The moment there is a rumour they increase their product prices,” Wilken said.

“I think consumers are going to have a very difficult Christmas and 2014.” - Daily News


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