Growth in demand for credit by South Africa’s private sector quickened to 25,08% year-on-year in April, central bank data showed on Thursday, making another interest rate increase next week more likely.
Credit growth accelerated from a downwardly revised 24,09% in March while the broadly defined M3 measure of money supply grew by 22,27%, above forecasts, compared to 20,02% the previous month.
”I think it seals the fate for a rate hike. It is definitely worse than we had anticipated,” said George Glynos, economist at ETM.
”A combination of these data and the inflation figures will lead the Reserve Bank to want to not only contain borrowing but to contain inflation expectations as well. A 50 basis point [interest rate] hike is anticipated [next week].”
The central bank left its key repo rate unchanged at 9% in February and April after a total 200 basis points in hikes last year in a bid to stem inflationary consumer demand.
Some analysts said another hike was almost inevitable at the next monetary policy committee meeting on June 6/7, especially after consumer inflation data on Wednesday showed the key CPIX gauge at 6,3% year-on-year in April, breaching the central bank’s targeted 3% to 6% range.
The Reserve Bank had forecast a peak in the CPIX gauge — which measures consumer prices minus mortgage costs — of only 5,9%.
A Reuters poll of 14 economists predicted last week that private sector credit would grow by 23,95%. Annual growth in M3 — which often points to inflation pressure building in the economy — was expected to expand by 21,5% during the month from the previous rate.
Faster growth in Africa’s biggest economy has been driven largely by domestic demand, but spending has pushed household debt to a record 73,8% of disposable income in the fourth quarter of 2006, adding to inflationary pressures.
Central bank Governor Tito Mboweni said in April that the country’s household spending and credit were not immediately inflationary but warned that bank lending remained ”uncomfortably high”. – Reuters