Cape Town – South African consumers are feeling the pinch with more defaults on new accounts and an increase in ‘distressed borrowing levels’, and index shows.
The South African Consumer Credit Index (CCI) report by credit manager TransUnion shows a decline in the index to 51.2 in the third quarter of 2015, down from a revised 53.6 in the second quarter.
“While the CCI remains above the 50 point break-even mark, the decline in the index compared to previous quarters of the year shows that improving trends in consumer credit health have slowed and are possibly starting to reverse course,” vice president of analytic and decisioning solutions at TransUnion Owen Sorour says.
Sorour says that consumer credit health is only marginally better compared to the same quarter a year ago, despite a period of relatively soft inflation.
He says the index highlights SA’s weak GDP growth, which at around 1.5% is well below the historical average.
Despite the “somewhat encouraging” official employment statistics for the 3rd quarter, he said, the broader trend is still one in which new job opportunities are scarce and that salary increases are barely keeping pace with inflation
“In general, consumers are feeling the pressure.”
We are beginning to see this in increased defaults in areas such as automotive and banking loans, typically the first areas to indicate a worsening situation, TransUnion says in its statement.
Sorour said that while businesses will not be affected by this trend for some time, eventually reduced consumer spending will result in pressure on business margins.