Johannesburg - Data showing South African households and companies continue to cut back on credit, that unemployment is climbing and factory gate inflation falling, again, have stoked hopes for another interest rate cut.

The numbers may knock hopes of a swift exit from recession and a deteriorating jobs picture will heap pressure on President Jacob Zuma's government to do more to help the poor at a time when tax revenue is dwindling and the fiscal deficit is rising.

The central bank on Thursday said private sector credit growth cooled to its lowest level in 43 years as South Africans struggle in the country's first recession since 1992.

The central bank left interest rates unchanged at its last two meetings citing balanced inflation risks, after reducing the repo rate by 500 basis points to 7.0% since December.

Some analysts said the weak credit growth and producer inflation falling 3.7% year-on-year in September - the fifth consecutive month of decline - had reopened debate on whether there was room for another cut this year to boost the economy more.

"We still think that there is a possibility that interest rates may be cut further, maybe in December," said Salomi Odendaal, economist at Citadel.

"It's not out of the question with inflation numbers on the low side, and with these numbers we think there is still room for another interest rates cut," she said, also alluding to annual consumer inflation braking to 6.1% from 6.4% - within sight of the 3% to 6% band.

Jobs are also being lost, adding to an already dire employment picture.

Official unemployment climbed further to 24.5% of the labour force in the third quarter, but after including the hundreds of thousands of people who have given up on finding a job, the rate swelled to 34.4%.

Stats SA. said 484 000 people lost their jobs in the quarter, the bulk of them in the manufacturing sector, one of the hardest hit by a global downturn.

Rising unemployment and uncertain economic conditions will see consumers hesitant to spend even around Christmas time, weighing further on economic growth.

"The Reserve Bank's latest monetary policy statement was dovish in tone suggesting that concerns that growth will disappoint remain," said Nedbank in a note.

"We believe that should the recovery lose momentum over the coming months the Bank may cut rates by 50 basis points one last time this cycle."

Inflation pressures

However, some economists said although consumer inflation was inching closer to the central bank's target and PPI was falling, inflationary pressures loomed, particularly from expected big increases in power prices.

The central bank said last week high electricity prices posed one of the biggest risks to the inflation outlook in the long term.

"I don't think there is scope really for interest rate cutting ... Eskom tariff hikes will also take effect next year which will push up inflation," said Freddie Mitchell, economist at Efficient Group.

State-owned electricity firm Eskom has asked for more price increases and wants a 45% tariff rise each year for the next three.

"The concerning inflation outlook, along with both our and the Reserve Bank's expectation for a moderate economic recovery in the coming quarters, should keep the Sarb in a neutral mood for some time," said Absa Capital in a note.

"We therefore see interest rates remaining at current levels well into 2010 with a gradual tightening cycle to commence in Q3 2010."

- Reuters