Johannesburg - Credit data from the Reserve Bank on Friday confirmed that the sluggish domestic economy is showing no sign of an early recovery. Total claims by banks on the private sector rose 7.62 percent year on year in October, from 7.46 percent in September. But the acceleration has little significance.
Among the few signs of strong growth was in the category described as investments, which rose from R140.5 billion in September to R143.1bn in October.
Stanlib chief economist Kevin Lings said the investment transactions largely related to derivative exposures. “For instance instruments to hedge against exchange rate or commodity price movements.”
Other types of credit extension remained subdued. Total loans and advances fell in the month from a little over R2.4 trillion to just under R2.4 trillion. This dragged down year-on-year growth in the item to 7.78 percent, from 8.29 percent in September.
Investec economist Kamilla Kaplan said: “Annual growth in total loans extended to households slowed for the ninth consecutive month to 7.2 percent from 7.5 percent in September. Much of this slowdown can be ascribed to the developments in the unsecured credit category.”
Growth in unsecured lending grew rapidly for a period, raising concerns about a credit bubble. But the pace of growth in this type of lending has been slowing since the fourth quarter of last year, according to Kaplan. “Deteriorating assessments of consumer creditworthiness has prompted lenders to tighten credit standards as part of risk reduction measures.”
Absa Capital noted that the recently released Bureau for Economic Research consumer confidence index showed “households remained pessimistic about the prospects of the economy and their own finances, which will likely reduce appetite for credit-supported spending”.
Lings pointed to one positive sign. Though mortgage credit was up only “a modest 2.4 percent year on year, this is the highest annual rate of increase in 18 months. Hopefully, the growth in mortgage activity over the past three months reflects the start of a steady and ongoing improvement in housing activity, albeit off a very low base.
“Residential housing plans passed have also been trending higher for the past few months.
“Over the past year, mortgage credit has risen by a total of only R26.2bn. This compares with growth of R160bn in 2007, R113bn in 2008, R35bn in 2009, R40bn in 2010 and R26bn in 2011.”
The data reinforces the market expectations that there will be no early hike in the Reserve Bank’s 5 percent repo rate. - Business Report