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Johannesburg - Growth in credit demand by South Africa’s
private sector slowed to 5.47% year-on-year in September from 6.06% growth in
August, central bank data showed on Monday.
Growth in the broadly defined M3 measure of money supply
however accelerated to 6.8% year-on-year compared with 6.22% in August.
Economists surveyed by Reuters on October 21 forecast
private sector credit expansion (PSCE) of 5.77% year-on-year in September while
growth in M3 was seen at 6.55%.
“(The credit number) is a little bit lower than both our,
and consensus estimates. A slowdown in both household and corporate credit
growth accounted for the more modest PSCE print. Household credit slowed for
the third consecutive month actually.
“I think a lot of it is due to base effects because in the
latter half of last year we did start to see a pickup in the headline PSCE
growth momentum. So it doesn’t really come as a huge surprise to us that
headline growth is slowing down.
“But certainly I think ... the Reserve Bank will remain
pretty comfortable at this stage that in terms of demand driven inflationary
pressures in the South African economy ... it seems as if these pressures
remain relatively benign for now and that’s why we believe that rates are
likely to remain on hold for longer,” says Jeffrey Schultz, macro strategist at
Absa Capital.
Market reaction
The rand initially strengthed to R7.8180 against the dollar from R7.84 just before the data was released at 06:00 GMT. By 06:32 GMT it was trading at R7.8375. The yield on the 2015 bond was unchanged at 6.58%.
Background
- Credit demand growth has been in positive territory since
May last year, but its recovery has been weak and is expected to be constrained
by high unemployment and an uncertain outlook for companies.
- Household debt to disposable income remains near record highs and the labour market continues to be of concern after about a million people lost their jobs in 2009. Unemployment edged up to 25.7% in the second quarter of this year from 25% in the first.
- Interest rate are at thirty-year lows after the Reserve Bank lowered its repo rate by 650 basis points to 5.5% in the two years to end-2010. It has left rates steady so far this year.
