Filomena Scalise

Johannesburg - The credit health of overburdened consumers deteriorated in the second quarter, credit bureau TransUnion said yesterday, and it is expected to worsen further amid rising rates, high inflation and a weak economic outlook.

Cash-strapped consumers are digging deeper into their pockets as food, fuel and power costs increase, and a tightening interest rate cycle is expected to heighten their vulnerability.

The Reserve Bank raised its repo rate by 25 basis points this month, its second increase this year, as inflation remained above the 6 percent ceiling of its target range.

Yesterday TransUnion’s consumer credit index declined to 48.9 in the second quarter from 49.8 in the first quarter, extending the decline in credit health to 10 consecutive quarters since the fourth quarter of 2011.

A score below 50 indicates consumer credit health is worsening, while a score above 50 shows fewer payment defaults.

TransUnion also found that household cash flow worsened further in the second quarter and nominal household disposable income growth did not keep up with rising prices of non-discretionary consumer goods and services.

“Real household disposable income growth is around zero percent year on year, indicating that prices of everyday goods and services are rising faster than aggregate incomes,” TransUnion reported.

“Given the recent poor unemployment trends, the sharp decline in inflation-adjusted household income, and yet another interest rate increase by the Reserve Bank in July, it appears unlikely that the rate of defaults will fall in the short to medium term.”


This comes as growth in household credit extension was steady last month at 4.32 percent year on year from 4.30 percent in May. Growth in unsecured credit fell to 5.92 percent year on year last month from 6.68 percent in May.

According to the report, there are 1.2 million accounts that are three months or more in arrears, and 3.8 million accounts that are one month behind. Credit card debt measured R72 billion.