Household credit growth could stay in single digits - analyst

Johannesburg - Growth in household credit balances and the various secured and unsecured components of household credit is forecast to remain in single digits this year, Jacques du Toit, property analyst at Absa Home Loans, said on Monday.

This is in view of factors such as expected low economic and employment growth, rising inflation and higher interest rates during the course of 2016.

Du Toit said the value of outstanding credit balances in the South African household sector increased by 4.6% year-on-year (y/y) to R1 485.1bn at the end of January 2016.

Growth in secured and unsecured credit balances was largely stable in the first month of the year from end-2015. The value of total outstanding mortgage balances, comprising household and corporate mortgages, increased by 6% y/y to a level of R1 232bn (39.7% of total private sector credit balances of R3 104.6bn) at end-January 2016.

Corporate mortgage balances showed growth of 9.6% y/y to R364.2bn at the end of January. Outstanding household mortgage balances increased by 4.5% y/y to R867.8bn (70.4% of total mortgage balances and 28% of total private sector credit balances) at end-January.

South Africa's private sector credit extension (PSCE) growth dropped back from a near seven-year high of 10.18% year-on-year in December to 8.54% year-on-year in January, compared to a consensus forecast of 9.55% y-o-y, according to money supply and credit data reported by the SA Reserve Bank (Sarb) on Monday.

In turn, broad M3 money supply growth decelerated to 10.28% y-o-y in January from 10.47% y-o-y previously – also the highest rate since early-2009.

According to Bart Stemmet, analyst at NKC African Economics, PSCE growth has dipped back to below the average seen over the past two years, but the series has been relatively volatile over the past few months. To him this suggests it could only be a temporary blip.

"On the other hand, there has been a broad upward trend in money supply growth over the past few years despite the SA Reserve Bank’s monetary tightening efforts during this period," said Stemmet.
 
"Policymakers will keep a close eye on this phenomenon over the months to come."