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Credit growth picked up in April, largely due to an increase in corporate credit demand. The SA Reserve Bank watches credit and money supply figures as an early warning signal of excessive demand in the economy, which could signal future inflation. So far, credit figures have shown tepid growth and haven’t given the central bank any cause for concern about its 3% to 6% inflation target range.
MORTGAGES STAGNANT Mortgage advances account for around 50% of all credit extended. Growth in mortgages has largely moved sideways since mid-2009, with 3% recorded in April. Brait economist Colen Garrow says the weak performance of mortgages growth must affect the retail sector in the months ahead. Commercial banks are risk averse to extend credit to consumers while economic growth is tepid and the labour market still weak.
HOUSEHOLD DEMAND SUBDUED Vunani Securities’ Johan Rossouw says household demand for credit was more subdued in April than corporate demand, rising by only 0,14% month-on-month. Compared with April 2010, credit extension to households eased slightly to 6,9% from just above 7% year-on-year in March. Other loans and advances – mainly corporate credit – hit an 11,7% year-on-year rise in April.
CORPORATE GROWTH HIGHER Corporate demand for credit drove growth higher, but Nedbank’s Carmen Altenkirch says corporate demand for credit will remain relatively subdued as businesses will probably be hesitant to expand operations too aggressively, given lingering uncertainties about the strength of both local and global recoveries, significant power and transport infrastructure constraints and ample spare capacity in some sectors.
MONEY GROWTH LOWER Growth in broad money supply – all deposits with banks – slowed to 6% in April from 6,5% in March, much slower than the anticipated 6,9% increase. M3 growth was below expectations, mainly due to an R18,7bn drop in net foreign assets and a R13,4bn drop in net other assets and liabilities. These contractions offset the impact of a massive R17,5bn rise in claims on the private sector.
MORTGAGES STAGNANT Mortgage advances account for around 50% of all credit extended. Growth in mortgages has largely moved sideways since mid-2009, with 3% recorded in April. Brait economist Colen Garrow says the weak performance of mortgages growth must affect the retail sector in the months ahead. Commercial banks are risk averse to extend credit to consumers while economic growth is tepid and the labour market still weak.
HOUSEHOLD DEMAND SUBDUED Vunani Securities’ Johan Rossouw says household demand for credit was more subdued in April than corporate demand, rising by only 0,14% month-on-month. Compared with April 2010, credit extension to households eased slightly to 6,9% from just above 7% year-on-year in March. Other loans and advances – mainly corporate credit – hit an 11,7% year-on-year rise in April.
CORPORATE GROWTH HIGHER Corporate demand for credit drove growth higher, but Nedbank’s Carmen Altenkirch says corporate demand for credit will remain relatively subdued as businesses will probably be hesitant to expand operations too aggressively, given lingering uncertainties about the strength of both local and global recoveries, significant power and transport infrastructure constraints and ample spare capacity in some sectors.
MONEY GROWTH LOWER Growth in broad money supply – all deposits with banks – slowed to 6% in April from 6,5% in March, much slower than the anticipated 6,9% increase. M3 growth was below expectations, mainly due to an R18,7bn drop in net foreign assets and a R13,4bn drop in net other assets and liabilities. These contractions offset the impact of a massive R17,5bn rise in claims on the private sector.
