Johannesburg - Credit extended to the private sector has grown modestly as banks and retail outlets east credit standards.
In October, growth in private sector credit demand in South Africa quickened to 8.87 percent year-on-year from 8.39 percent in September, data from the South African Reserve Bank showed on Monday.
This, says Investec chief economist Annabel Bishop, is on the back of easing rules around credit extensions.
Sales on credit has slowed in recent months due to the current economic climate, which saw the economy contract 1.3 percent in the second quarter and only gain 0.7 percent in the third.
In addition, consumers are facing increasing strain on their pockets as the prime lending rate was recently increased from 9.5 percent to 9.75 percent, the second hike this year, and food prices are set to leap as the drought hits home.
Investec notes credit extended to households was up 4.5 percent year-on-year, while that to corporates was 13.3 percent higher year-on-year.
Households continue to account for a declining share of total private sector credit extension at 48.3 percent, with companies at 51.7 percent.
Bishop’s note says households have seen a modest lift in credit growth to above 4 percent year-on-year and this figure is now at 4.5 percent, up from closer to 3.5 percent year-on-year in the twelve months before, as retail banks reported some easing in lending standards on reduced credit losses.
Household mortgage advances growth lifted slightly, to 4.3 percent year-on-year, providing impetus to the sector. Corporates are seeing PSCE growth driven by general loans and advances, as banks continue to appear to favour corporate lending.
Growth in money supply improved, to 9.7 percent year-on-year from 8.5%, driven evenly by a rise in net other assets, claims on the private sector and a run down on government deposits.
Investec expects interest rates to rise next year by at least 25bp on hawkish communication from the Monetary Policy Committee. However, there is still a chance that weaker GDP growth in 2016 than the Reserve Bank expects dulls the enthusiasm of the MPC to further quell economic demand, it adds.
IOL