Need for credit remains low

Growth in the broadly defined M3 measure of money supply accelerated to 2.41% year-on-year compared with 1.4% previously.

A Reuters poll forecast private sector credit demand would increase by 1.0% year-on-year in June while annual M3 was seen at 2.25%.

"It's not strong growth. I think it points quite conclusively towards further monetary easing by the Reserve Bank," said Colen Garrow, an economist at Brait.

The South African Reserve Bank halted interest rates at a three-decade low of 6.5% in March after cutting by a total of 550 basis points in an easing cycle stretching back to December 2008.

Governor Gill Marcus cited a continuing recovery in growth as proof that further stimulus was not yet needed. But some analysts have said the bank is likely just waiting for the previous cuts to have an impact before cutting some more.

Consumer spending is slowly recovering from a slump experienced last year, however households are still highly indebted and not feeling confident enough to borrow more.

Unemployment also remains a concern in South Africa, where more than 25% of the labour force is out of work, and a further 61 000 jobs were lost in the second quarter, according to Statistics South Africa data released last week.

"Demand for loans may have also been negatively affected by the continued high levels of household debt which measured 78.4% of disposable income in the first quarter of 2010," Marcus said of the weak demand for credit.

The rand was trading firmer at 7.3332 against the dollar at 08:45 from 7.36 before the data was released at 08:00. The yield on the 2015 bond was at 7.57% from 7.565%.

 - Reuters