GROWTH in credit demand by South Africa’s private sector slowed to 8.64% year on year in January, compared with a 10.09% rise in December, Reserve Bank data showed on Thursday.

Expansion in the broadly defined M3 measure of money supply accelerated to 6.75% year on year in January after rising by 5.17% the previous month, the Reserve Bank said.

Renaissance Capital analyst Elna Moolman said: "The growth in credit extension fell short of our expectations with a moderation to 8.6% year on year in January.

"This seems to be mostly owing to the corporate sector as credit extended to households maintained its December growth rate at about 9.9%.

"The ongoing weakness in the mortgage market is striking — mortgage advances were virtually unchanged from December," she said.

ETM Analytics economist Jana le Roux said it had been noted over recent months that household credit growth had lost some upside momentum. However corporate credit growth had been rather robust, buoying the headline PSCE number.

"Therefore, the downside surprise may have been a function of a sharp decline in corporate credit growth," she said.

"Following a period in which a divergence was noted between M3 and PSCE, presumably on the back of a slowdown in public sector borrowing (including local government and parastatals) which weighed on M3, the rebound in M3 to resume the relationship does not come as much of a surprise.

"A further convergence in the two series is likely to materialise in coming months," she said.

Ms le Roux said the aggregate monetary environment remained accommodative, which suggests risks to inflation over the medium term remain to the upside.

"The Reserve Bank is likely to keep its accommodative policy measures intact as the domestic economy remains highly reliant on consumption to support overall growth," she said.