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October credit growth slows to 8.35%

Nov 29 2012 08:23 Reuters

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Johannesburg - Growth in credit demand by South Africa's private sector slowed to 8.35% year-on-year in October compared with a 9.07% rise in September, central bank data showed on Thursday.

In the broadly defined M3 measure of money supply, growth also braked, registering 5.69% year-on-year in October after rising by 7.54% in the previous month.

Economists surveyed by Reuters forecast year-on-year private sector credit growth of 9.3% in October and money supply growth of 7.1%.

"The trend is that it starts to come down as consumers become more cautious about adding more credit in the current uncertain economic environment," said economist Johannes Khosa.

"The effect of low interest rates will be countered by high inflation and consumers being cautious. The consumer confidence numbers are still low and that's not good for credit demand.

"We may see some support from seasonal factors in the last quarter of this year, but beginning of next year we'll see a weaker trend," he said.

Market reaction

The rand nudged lower to R8.8275 against the dollar at 06:23 GMT from R8.82 before the data was released at 06:00 GMT. The yield on the 2015 bond was steady at 5.47%. 

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.

Credit extension to the private sector moderated on a quarter-to-quarter basis in Q3 to an annualised increase of 5.4% was recorded.

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

The Reserve Bank's benchmark repo rate is at a four decade low of 5.0% after the central bank cut it by 50 basis points in July which is expected to increase appetite to borrow.

 

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