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Cape Town - Higher interest rates, rising prices and stricter lending criteria are starting to curb consumer credit demand, Nedbank's group economic unit said on Wednesday.
In its monthly money supply report released on Wednesday, the bank said consumer credit figures for February were below market expectations.
"Growth in private sector credit extension (PSCE) finally surprised on the downside, coming in well below market expectations of 21.5% year-on-year.
"This suggests that higher interest rates, rising prices and stricter lending criteria are finally taking their toll on consumers' appetite for credit," the bank said.
Growth in money supply also eased significantly to 21.07% year-on-year in February, down from 25.2% year-on-year in the previous month.
"Money supply and credit growth tend to lag [behind] the real economy. The remarkable growth seen since 2005 is likely to reverse more significantly in 2008 as the effects of higher interest rates and tighter credit conditions take hold."
Vehicle finance and home loans were also slowing down.
"Taken together, instalment and leasing finance slowed further, easing to 11.6% year-on-year from 13.8% year-on-year.
"Growth in mortgages advances, which makes up 50% of asset-backed credit, continued to moderate, easing to 23.1% year-on-year from 24.5 percent year-on-year," the bank said.
Insolvencies were also picking up -- a trend providing further indication that consumers were under pressure.
The bank warned that the situation could deteriorate if the SA Reserve Bank again raised interest rates later this month. "If the [SA Reserve Bank's monetary policy committee] MPC hikes rates, the economy, which is already looking weak, will be in a much worse state by the end of the year," Nedbank said.