Private credit growth faster than expected
CREDIT extension to the private sector (PSCE) grew faster than expected in December, accelerating to 10.09% year on year from 9.59% in November‚ Reserve Bank figures released on Wednesday showed.
However, growth in M3 money supply, South Africa’s broadest measure of money supply, came in lower than expected, slowing to 5.17% year on year in December from 6.26% in November.
Credit extension was expected to have increased by 9.76% year on year, according to a survey by I-Net Bridge‚ while M3 was expected to have increased by 6.1%.
Total loans and advances recorded a 9.96% year-on-year growth in December from 9.86% year on year growth in November.
Total domestic credit extension amounted to 10.63% year on year in December from a 9.78% year on year increase in November.
The Bank also said its international liquidity position fell slightly, to $47.948bn in December from $48.431bn in November.
"Credit growth is quite steady at the moment," Citadel economist Salomi Odendaal said. "It has picked up over the past year or so.
"The household credit growth is still mainly outside of mortgages. Mortgage growth is the one part of credit growth that’s still very slow. It’s growing at about 2% at the moment, which is probably a reflection of the housing sector that’s still struggling to recover.
"Corporate credit growth also seems to be doing quite well but at the moment, if you look at credit growth, I don’t think it will have any impact on interest rates, which we expect to be steady this year."
ETM economist Jana le Roux said the faster than expected rise in private-sector credit extension "suggests there is still robust demand for credit".
She also noted the small contribution of mortgages to credit growth. "The concern is that if you look at the breakdown of the data, you will see that PSCE ex-mortgages is very strong, at around 14%, which suggests that credit is used for consumption rather than for investment."