Monthly Economic Snapshot
Co-founder of Opportunity Private Capital , Nick Morgan summarises August ’ s economic indicators and takes a look at inflation hedging in the context of Cape Town Property .
Local Economic Indicators ( 30 August 2024 )
All-Share Index 30 August 2024 : + - 83,750
All-Share Index 30 August 2023 : + - 74,787
Market PE ratio : 17.9
USD / ZAR R17.84 /$
South Africa 10Y Government Bond yield : Current 9.21 %
( Data : Bloomberg ; SimplyWallSt ; Tradingeconomics .; Google Finance .)
News
Forget the published inflation rate . According to StatsSA a shopping excursion for grocery essentials that would have cost R1 000 only 5 years ago , now costs a disturbing R1 466 . ( Moneyweb , 2024 ). Shopping is hurting consumers in all the wrong places . According to S & P Global the improved inflationary outlook in the USA will likely prompt a rate cut by the Federal Reserve in September . This is potentially good news for South African consumers as the SA Reserve Bank should follow suit giving much needed respite . SA Banks to implement a significant change to EFT transactions in September between Common Monetary Area ( CMA ) countries - Namibia , Lesotho , Eswatini . In effect , SA account holders will no longer be able to make payments to account holders in these countries .
CAPE TOWN RESIDENTIAL PROPERTY AND INFLATION HEDGING
Cape Town property has historically exhibited remarkable growth over certain periods . The question beckons whether this growth has been effective in staving off the eroding effects of inflation . It ’ s commonly said that property provides an effective hedge against inflation . Well , does it really ? Let ’ s clear up a familiar misconception about this statement .
66 REI MAGAZINE SEPTEMBER 2024
A differentiation must be considered between inflation hedging and inflation protection . To be an actual hedge against inflation housing values should move in synchronicity with inflationary movements . Consequently , for an asset class to be an effective inflation hedge it must correlate positively in a close relationship with inflation ( Stefan , 2017 ).