Rising interest rates contribute to households being R253 billion poorer in Q3
Loading player...
The value of South African households’ wealth (expressed in current prices) decreased by an estimated R1.528 trillion (R1 528 billion) in the half-year since the first quarter of 2022 (Q1 2022) to R15.5 trillion. An estimated decrease of R253 billion in Q3 2022 followed the decline of R1.275 trillion in Q2 2022.
This decline also means the value of household wealth (in current prices) was R9.3 billion or 0.1% lower compared to a year ago (Q3 2021), meaning the initial gains in the next six months to Q1 2022 were more than erased in the six months to Q3 2022.
For households to become richer, their wealth must at least increase by more than the consumer price inflation (CPI) rate. When expressed in constant prices – to establish whether household wealth increased by more or less than the consumer price inflation (CPI) rate – analysis shows it was actually 6.2% lower than a year ago. Put differently, households were essentially an estimated R977.5 billion poorer compared to Q3 2021 – and at similar levels as in Q1 2015.
The decline in the value of household wealth was caused by a decrease in the value of household assets, specifically financial assets. Several factors contributed to the declining value of household assets over the past six months. The most prominent of these factors are fast and large increases in interest rates all over the world in an attempt to combat high CPI rates, and an expectation of a world economic recession. Consequently, share prices declined and bond yields increased, negatively affecting the value of households’ pension funds and investments.
The value of households’ pension funds and other interests in long-term insurance declined by an estimated R630.3 billion (in current prices) in the six months since Q1 2022, while that of investments (in risky assets such as some unit trusts) decreased by R1.061 trillion. Combined these two asset categories declined by R1.691 trillion. This decline was marginally offset by an increase of R250.1 billion in the value of other assets such as residential buildings, durable goods, and deposits, leading to the value of total assets decreasing by an estimated R1.441 trillion.
In addition, outstanding household liabilities increased by an estimated R86.9 billion in the six months to Q3 2022, with equal increases in outstanding mortgages and other debt
This decline also means the value of household wealth (in current prices) was R9.3 billion or 0.1% lower compared to a year ago (Q3 2021), meaning the initial gains in the next six months to Q1 2022 were more than erased in the six months to Q3 2022.
For households to become richer, their wealth must at least increase by more than the consumer price inflation (CPI) rate. When expressed in constant prices – to establish whether household wealth increased by more or less than the consumer price inflation (CPI) rate – analysis shows it was actually 6.2% lower than a year ago. Put differently, households were essentially an estimated R977.5 billion poorer compared to Q3 2021 – and at similar levels as in Q1 2015.
The decline in the value of household wealth was caused by a decrease in the value of household assets, specifically financial assets. Several factors contributed to the declining value of household assets over the past six months. The most prominent of these factors are fast and large increases in interest rates all over the world in an attempt to combat high CPI rates, and an expectation of a world economic recession. Consequently, share prices declined and bond yields increased, negatively affecting the value of households’ pension funds and investments.
The value of households’ pension funds and other interests in long-term insurance declined by an estimated R630.3 billion (in current prices) in the six months since Q1 2022, while that of investments (in risky assets such as some unit trusts) decreased by R1.061 trillion. Combined these two asset categories declined by R1.691 trillion. This decline was marginally offset by an increase of R250.1 billion in the value of other assets such as residential buildings, durable goods, and deposits, leading to the value of total assets decreasing by an estimated R1.441 trillion.
In addition, outstanding household liabilities increased by an estimated R86.9 billion in the six months to Q3 2022, with equal increases in outstanding mortgages and other debt
