Consumer prices in South Africa are rising at an alarming rate, the Russia and Ukrainian war as well the slowdown in Chinese economic recovery. Together these events have contributed to rising CPI rates impacting the pockets of South African consumers.
What is CPI?
The Consumer Price Index or (CPI) measures monthly changes in prices for a range of consumer products. Changes in the CPI record the rate of inflation. The CPI is an indication of the increase in the cost of living and the higher the index, the higher the increase in consumer good prices over a given period.
How does fuel fit into the latest CPI increase?
The fuel price is the major contributing factor to the overall Consumer Price Index (CPI). The results from the latest CPI increase indicated that if fuel was removed from the CPI reading, the headline rate falls to 5.1% from the 6.5% CPI total figure.
How do fuel prices indicators impact South Africans?
Fuel price impact on SA consumers
Fuel price impact on SA savers
Money market account: Money market accounts are offered by traditional banks. A money market account has similar characteristics to a traditional savings account, however, typically provides investors with a higher interest return. Money market accounts require customers to deposit minimum amounts and then maintain that minimum balance. The interest rates offered are variable and linked to the Repo rate. The higher the Repo rate the better the returns, and with the latest increase in Repo rate makes for an attractive savings consideration.
Money market fund: A money market fund is a kind of mutual fund that invests in highly liquid near-term money market securities such as cash, cash equivalent securities, and bonds with a short-term, maturity of less than 13 months. Although not as safe as the money market account, this long-term savings vehicle is still viewed as a low-risk asset, providing higher returns than the standard savings account.
Notice deposit: This is a savings account linked to the Repo rate, that requires an investor to give notice before taking funds out of the account. The longer the notice period the higher the interest returns offered by the financial institution.
Fixed deposit: This instrument allows investors to fix the interest received over a fixed period. The longer the period fixed, the higher the returns offered. This instrument allows investors to receive reliable and consistent cash flow in the form of fixed interest returns and can be used by both risk averse investors, and investors looking to hedge market risk with a reliable cash flow.
Fuel price impact on SA retirees
In closing
SA consumers, savers and retirees need to be prepared for increasing fuel prices and the knock-on effect this will have on everyday items. Money must be working for you and achieving a higher rate of return for wealth to grow. The combination of the Russian war and sanctions imposed mean fuel prices may likely increase. South Africans must be prepared by ensuring current savings are keeping up with the increase in the cost and protecting long term funds as bets as possible by not withdrawing early as a result.
