Credit growth slows down
According to the Reserve Bank, private sector credit extension (PSCE) rose 23.13% in the year to July, down from 24.99% in June. This slowdown is not enough to remove the pressure for higher interest rates fuelled by soaring inflation.
This is a sign that steeper lending rates have already started to curb consumer borrowing. Analysts say that the downtrend is likely to gather momentum in the months ahead, as more stringent lending rules introduced in June and the effect of six interest rate hikes since the middle of last year feed into the economy.
Investec economist Annabel Bishop said that the risk for an additional interest rate hike is mounting due to the deterioration in July’s inflation outcomes.
The Bank has raised its key repo rate by three percentage points to 10% since June last year, bringing it to a four year peak. Retail sales have started to slow, subsiding to 6.4% in the year to June from 9.2% the previous month. New vehicle sales have fallen for four months in a row.
Dennis Dykes, Nedbank chief economist said that they had expected a bigger slowdown in the credit numbers given the higher interest rates and that this would support the case for further monetary tightening, which would be a mistake.
The data showed that annual growth in mortgage advances decreased slightly to 26,7% from 27,2% in June while the pace for instalment sales barely budged at 10,1% from 10%.
The core measure of PSCE — which includes mortgages, leasing finance and instalment sales — slowed to 23% from 23,5%. This component makes up 62% of the PSCE basket and includes most household credit.
This article hasn't been commented yet.