Why does CPI feel lower than real inflation?

CPI measures a fixed basket of goods with statistical adjustments. If your personal spending is heavy in fast-rising categories like rent, school fees, or medical aid, your lived inflation can be much higher than the official CPI number.

Is M3 money supply a better measure of inflation than CPI?

M3 is not a direct inflation measure, but it tracks the total rands in the economy. When M3 grows faster than CPI, it suggests monetary dilution that CPI may not capture - especially in assets, property, and long-term savings goals.

How can I protect my savings from money supply dilution?

Compare your salary, savings, and asset growth against M3 money supply growth. If your money grows slower than M3, you are losing purchasing power even if your rand balance increases. Use the purchasing power calculator on this site to check.

Reading time: 4 minutes · Published: Jan 2025

TL;DR: CPI inflation understates purchasing power loss for many households because it tracks a fixed average basket. M3 money supply growth reveals the bigger picture - when the total rands in the economy grow faster than your income, your share shrinks even if your payslip grows.

CPI is a Scam

CPI is treated as the official inflation number, but it often fails to describe what people actually experience when rent, food, transport, education, medical costs, and assets move faster than wages.

Why CPI Can Feel Too Low

CPI measures a selected basket of consumer goods and services. That basket uses weights, substitutions, averages, and categories. If your personal spending is heavy in categories rising quickly, your lived inflation can be much higher than the official rate. A young family renting, commuting, buying food, and paying school fees can experience a very different economy from the headline CPI print.

Key point: South Africa's M3 money supply has grown at an annualised rate of roughly 8-10% over the past decade, while CPI has averaged around 4.5-5.5%. That gap represents monetary dilution that doesn't show up in the inflation numbers.

CPI also focuses on consumer prices, not the broader dilution of money. Asset prices, property, financial markets, and long-term savings goals can move in ways that are not fully captured by the monthly inflation story. If the cost of entering the middle class rises faster than CPI, the official number may look calm while real life becomes harder.

Money Supply Shows Another Side

This site looks at South Africa's M3 money supply because it asks a more basic question: how many rands exist in the economy? When the supply of rands grows, each rand has more competition. That does not guarantee every price rises immediately, but it creates pressure on the purchasing power of savings, salaries, and cash balances.

If your money grows at 5% while broad money grows at 10%, your rand balance may be bigger, but your share of the monetary system is smaller. That is the heart of the purchasing power problem.

What to Do With This Information

Do not use CPI as the only benchmark for whether you are getting ahead. Compare your salary, savings, business revenue, or asset value against money supply growth as well. It is not a perfect measure of real wealth, but it is a useful warning light.

Try the purchasing power calculator to estimate what an amount would need to become to keep pace with M3 growth, or view the M3 chart to see the trend directly.