August credit growth slows

2012-09-28 08:34

Johannesburg - Growth in credit demand by South Africa's private sector slowed to 7.93% year-on-year in August compared with an 8.34% rise in July, central bank data showed on Friday.

Growth in the broadly defined M3 measure of money supply also braked to 7.78% year-on-year after rising by 8.26% in July.

Economists surveyed by Reuters forecast year-on-year private sector credit growth of 7.95% in August while M3 was seen expanding by 7.65%.

Citadel economist Salomi Odendaal said: “There’s still very slow growth in the mortgage demand, the housing market or sections of it is still struggling. The growth in credit to households is picking up slowly ... but it’s not near the boom times that we’ve seen before so I think there are still pretty cautious in borrowing and there are indications that quite a number of households are having trouble in servicing debt especially the middle to lower income sectors.

“Growth in credit to businesses seems to have come down a little bit recently and it’s mainly a lack of confidence in strong demand.

“Overall credit growth in South Africa is picking up slowly but it’s still in line with the current interest rate policy of the Reserve Bank,” Odendaal said.

The rand was weaker at R8.2495 against the dollar at 06:40 GMT from R8.2260 before the data was released at 06:00 GMT. The yield on the 2015 bond edged up to 5.355% from 5.35% but that for the 14-year bond dipped to 7.365% from 7.38%.

Credit demand growth has been in positive territory since May 2010, although its recovery has been somewhat constrained by high unemployment and an uncertain outlook for companies.

The ratio of household debt to disposable income remains extremely high at more than 76% while unemployment remains around 25%.

The Reserve Bank’s benchmark repo rate is at a four decade low of 5% but despite this, heavily indebted households are somewhat reluctant to borrow more.

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