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December credit growth quickens

Jan 30 2013 08:34 I-Net Bridge

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Johannesburg - Growth in credit demand by South Africa's private sector accelerated to 10.09% year-on-year in December, compared with a 9.59% rise in November, central bank data showed on Wednesday.

Expansion in the broadly defined M3 measure of money supply was slower at 5.17% year-on-year in November after rising by 6.26% the previous month, the South African Reserve Bank said. 

Salomi Odendaal, an economist at Citadel said: "Credit growth is quite steady at the moment. It has picked up over the past year or so. The household credit growth is still mainly outside of mortgages. Mortgage growth is the one part of credit growth that's still very slow. It's growing at about 2% at the moment which is probably a reflection of the housing sector that's still struggling to recover.

"Corporate credit growth also seems to be doing quite well but at the moment if you look at credit growth I don't think it will have any impact on interest rates, which we expect to be steady this year."

Said Jana Le Roux an economist at ETM: "The rising PSCE was stronger than expected, which suggests that there is still robust demand for credit. The concern is that if you look at the breakdown of the data, you will see that PSCE ex-mortgages is very strong at around 14%, which suggests that credit is used for consumption rather than for investment."

The rand was at R9.0335 against the dollar at 06:02 GMT from R9.0328 before the data was released at 06:00 GMT. The yield on the 2015 bond was slightly lower at 5.435%, as was that for the 2026 paper, which was yielding 7.49%.

Credit demand growth has been in positive territory since May 2010, although its recovery has been somewhat constrained by high unemployment and an uncertain outlook for companies.

The ratio of household debt to disposable income remains extremely high at 76% while unemployment remains around 25%.

The Reserve Bank's benchmark repo rate is at a four decade low of 5.0%. The central bank left it unchanged earlier this month, citing concerns about rising food prices and a depreciating rand exchange rate in a period of slowing growth.

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