July 1 (Bloomberg) -- South Africa's statistics office said it plans to reduce the weighting of food in the consumer price index as of next year, possibly cutting the inflation rate.

``We are likely to see a drop in the level of inflation because of the lower weighting of food,'' Patrick Kelly, head of consumer price statistics, said in an interview in Johannesburg today. ``This is because currently the rate of change in food is higher than the average rate of change in prices.''

The statistics office is overhauling the consumer price index to reflect changes in consumers' spending patterns over the past five years as households spend less of their budgets on food and more on cars. The adjustments may help to bring the inflation rate back into the 3 percent to 6 percent target range sooner, easing pressure on the central bank to continue raising interest rates.

``This is good news. The major drivers of inflation -- food, fuel and electricity prices -- the weighting of all three have been reduced,'' said Elize Kruger, an economist at Thebe Financial Services Ltd. in Johannesburg. ``This could be the bale-out that we need. It could potentially have monetary policy implications.''

Rising food costs, which account for about a quarter of the consumer price index, helped push inflation to an annual 10.9 percent in May, exceeding the target for a 14th consecutive month. The bank has raised its benchmark interest rate six times since last year to 12 percent to help bring inflation back within the target.

Inflation Impact

In the CPIX index, which excludes mortgage costs, the weighting of food will drop to 16.3 percent from 25.7 percent, the statistics office said in a statement. While transport's contribution will rise to 21.4 percent from 15.3 percent, mainly because of an increase in car purchases, the weighting of gasoline will drop to 4.47 percent from 5.08 percent.

Kruger said the changes may lower her forecast for CPIX inflation by 1.3 percentage points, based on provisional estimates. That would bring the inflation rate back below 6 percent by the third quarter of next year, Kruger said, compared with her previous forecast that inflation will exceed the target until 2010.

The new weightings, which were based on the Income and Expenditure survey published on March 4, will be applied for the first time to the January 2009 inflation data, scheduled to be published on Feb. 29, Kelly said.

New Items

New items in the consumer price index will include minibus taxi fares, restaurant meals, insurance and DVDs, while categories such as caravans, musical instruments and laundry services will be removed, Kelly said.

Statistics South Africa will also change the way it measures the cost of owner-occupied homes. From January, data from a rental survey will be used to measure this item, rather than interest on mortgage bonds, which is currently used, Kelly said.

``Interest rates are an inappropriate measure of housing costs as they reflect the cost of debt, rather than the cost of housing,'' Kelly said.

The CPIX will in future be defined as the consumer price index excluding owners' equivalent rent, he said.

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net

Last Updated: July 1, 2008 10:28 EDT