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Feeling the pinch? Middle-income consumers spend up to 80% of their monthly salary in 5 days

FNB estimates that it takes an average of 5 days for a middle-income consumer to spend up to 80% of their monthly salary. File Image: IOL

FNB estimates that it takes an average of 5 days for a middle-income consumer to spend up to 80% of their monthly salary. File Image: IOL

Published May 18, 2022

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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 – R500 000 per annum, survives on 20% of their monthly salary for more than 20 days in a month.

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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.

According to Raj Makanjee, CEO of FNB Retail, this is one of the indications that the average consumer is stretched financially.

"The trend also points to a continued culture of consumption," he says, "leaving consumers with little to start saving and investing for financial independence.”

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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 seen since 2016.

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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 percent in April to 4.75 percent.

This will 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 (MPC) was split when it decided to increase interest rate by 25 basis points to 4.25 percent a year.

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Three members of the MPC preferred the announced increase while two members preferred a 50 basis point (bps) rise as inflation outlook was assessed to the upside.

If the SARB increases interest rates aggressively, it will be following in the footsteps of rapid policy nominalisation in advanced economies such as the US and the UK.

South Africa’s headline inflation is expected to remain elevated and to print 6 percent in April, up from 5.9 percent, as supply-side price pressures continue to mount and spill over to core items.

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