Johannesburg - South Africa’s private sector credit extension growth slowed significantly to 8.1 percent year on year in June against the consensus forecast of 9.3 percent, mainly as a result of the slowdown in corporate credit growth, according to figures released by the Reserve Bank yesterday.
Household credit growth rose marginally to 3.5 percent from 3.2 percent previously.
Laura Campbell, an economist at Econometrix, said that most dramatically within the overall private sector credit extension, there was a sharp decline in HP (higher purchase) credit extension, which is mainly directed at purchases of durable goods, such as cars, furniture and household appliances. “This suggests that the demand for durable goods may be collapsing.”
Investec economist Kamilla Kaplan said the June private sector credit extension growth was underpinned by growth in the unsecured credit market of 5.5 percent year on year against a prior 3.5 percent.
Highly indebted
“Low statistical base factors played a role in boosting the annual growth outcome. Despite the slight lift in household credit extension in June, by historical comparison credit growth remained subdued. Household credit growth has steadily decelerated from the double-digit range in the fourth quarter of 2012. This modest trend is likely to persist in the coming months.”
She said on the demand side, households remained highly indebted at a time when interest rates were rising and real disposable income growth was at risk of slowing. Specifically, household finances are burdened by higher personal income taxes and rising living costs, associated with petrol prices and utility tariffs.
Kaplan said: “On the supply side, rates of credit extension are expected to be curtailed by the amendments to the National Credit Act, relating to more stringent affordability assessment criteria. Another potential restraint could be the proposed cap on interest rate charges, especially in the unsecured credit space.” Campbell said following the announcement of a 0.25 percent rise in the repo rate last week, one suspected interest rates would rise again in November.
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