INFLATION (OR CPI – CONSUMER PRICE INDEX)

Dear Client

Welcome to our October 2024 edition of FC Viewpoint.

IN THE NEWS:

  • The JSE All Share Index is up by 5% since our previous newsletter. The Index is on 85 444 on 10 October 2024.
  • 1 US Dollar will cost you R17.57; 1 Pound = R22.97 and 1 Euro = R19.21.
  • Annual consumer inflation (CPI) is at 4%.
  • The prime lending rate in SA finally decreased by 0.25% and currently is 50% per annum.
  • The price of Oil is $77 per barrel.
  • Post-election euphoria and Chinese stimulus led to a strengthening rand and great returns from SA assets.

THIS MONTH’S TOPIC: INFLATION (OR CPI – CONSUMER PRICE INDEX)

What is inflation?

  • Inflation is the decrease of money’s purchasing power.
  • Inflation is the rate of the general level of prices for goods/things and services are growing annually, and the purchasing/buying power is dropping.
  • South Africa’s inflation target range is between 3%−6%.

 

Let’s look at an example:

Assumptions:

  • Let’s assume that you want to retire in 30 years at the age of 65, you are currently 30 years old.
  • You believe that based on your monthly budget you could easily retire on R 25 000 pm should you be 65 today.
  • So, let’s see what the buying power of R25 000 pm in 30 years will be worth if we have an average inflation rate of 5%.

Outcome:

  • The R25 000 in 30 years will have a buying power of what R5 784 buys you in today’s terms.
  • In order to have the same value as R25 000 today in 30 years, you would have to have a whopping R108 050.

This is the power of inflation and how it erodes our buying power on a yearly basis.

TO CONCLUDE

In one of our next newsletters, I will elaborate on ways and strategies to counter the adverse effects of inflation.

Take care and keep well.

Wealth regards,

Fanie Jansen Van Vuuren CA (SA), CFP®

Director: FC Wealth and Investments (Pty) Ltd

E: [email protected]  |  T: 083 384 5868

W: www.fcfin.co.za

Download this issue of Viewpoint here