Credit up but spending still tight

Johannesburg - Credit growth among South African households has passed its lowest point, but experts say consumers will in future think twice before reaching for their credit cards.

Credit extension to South Africa's private sector grew at 0.8% year-on-year in May compared to -0.86% in April, according to Reserve Bank data released on Tuesday morning.

The rate of credit extended beat economists' forecasts, which stood at 0.5%, according to a poll conducted by I-Net Bridge.

"Credit is now positive on an annual basis for the first time since September 2009," said Nedbank Group [JSE:NED] economist Carmen Altenkirch.

But stronger than expected credit growth should not be read as an indication that households are leaping back into the debt pool.

"Households are still de-leveraging and credit growth will continue to lag economic growth," said Citi Group SA chief economist Jean-Francois Mercier.

"My gut feel is that the credit market is quite tight and demand and supply are quite tight; I would be surprised if it grows like this for a sustained period," said Russell Lamberti, economic strategist at ETM.

Lamberti added another reason why credit growth in May was strong could be a base effect due to the sharp decline reported in May last year.

Credit extension was most pronounced in the mortgage sector. Instalment sales credit reported only a marginal month-on-month increase, indicating that consumers are still not opening their wallets for durable goods.   

 - Fin24.com