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Johannesburg - The rate of growth in South African credit extension to the private sector (PSCE) is expected to have increased at a slower 15.2% year-on-year (y/y) in November from October's 16.2%, according to a survey of leading economists by I-Net Bridge.
South Africa's broad M3 money supply aggregate growth rate, meanwhile, is expected to have increased in November at 14.7% y/y from October's 15.6% increase.
Forecasts among the economists surveyed for PSCE ranged from 14.5% to 16.6%, while the range of forecasts for M3 was from 13.8% to 15.0% at the top of the range.
PSCE was at a whopping 22.6% a year ago, while M3 was at 23.2%, both providing a statistical high base.
While money supply is slowing, it still remains a concern on the inflation front, because if the amount of money increases at a faster pace than the amount of goods and services, the difference makes its presence felt in the form of inflation.
One of the economists in the survey says that between 2000 and 2007, money supply in SA grew nearly 5 percentage points faster than the nominal growth in the economy.
Credit extended to the private sector has been one of the main drivers in the money growth and will therefore continue to be monitored closely by the authorities and analysts.
While mortgage advances are set to remain damp in 2009, the "other" credit category is still seen as resilient at the moment. A possible area of concern is of consumers increasing their dependence on non-asset-backed credit like credit cards and overdrafts in an effort to maintain their standards of living amid tighter conditions.
Part of the growth of this category, though, is made up of local companies borrowing locally instead of overseas as the rand loses value.
Overall credit was at 22.3% in June 2006 when interest rates were first hiked by 50 basis points, but rates went up by a cumulative 500 basis points since then, with household spending on the wane as a result. Rates, though, were cut in December and further cuts are expected in the new year.
Money supply dipped below the crucial 20% mark in July for the first time
since November 2005.
The South African Reserve Bank will release the M3 and PSCE data at 08:00 on Wednesday, December 31.
- I-Net Bridge