FNB estimates that it takes an average of 5 days for a middle income consumer to spend up to 80 of their monthly salary. According to the research, this suggests that the average middle income consumer, earning between R180 000- R 250 000 per annum, survives on 20% of their monthly salary for more 20 days in a month. In addition, salaried middle income consumers with secured and unsecured credit spend , on average, 30 % of their income on unsecured credit and 35% on secured credit. The trend also points to a continued culture of consumption, leaving consumers with little to start saving and investing for financial independence.
Interest Rates to go up
The South African Reserve Bank is also expected to increase interest rates by 50 basis points this week. It should be noted that this will be the biggest single move since 2016. A majority of economists have warned that the SARB would increase rates by 50 basis points as headline inflation is expected to inch up by 6% in April to 4,75%. This mean that the already high cost of living will prevail for longer for cash strapped consumers until escalating prices, especially for food stuffs, are brought down to normal levels.
In March, the SARB's monetary policy committee was split when it decided to increase interest rate by 25 basis points to 4,25% a year. If the SARB increases interest rates aggresively, it will be following in the footsteps of rapid policy nominalisation in advanced economies such as the US and UK. South Africa's headline inflation is expected to remain elevated and to print 6% in April up from 5,9%, as supply side price pressures continue to mount and spill over to core items.
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