Growth in demand for credit from South Africa’s private sector slowed marginally to 24,84% year-on-year in May, data showed on Friday, easing slightly pressure for more interest-rate increases.
Private-sector credit extension slowed from 25,08% year-on-year in April, the South African Reserve Bank (SARB) said, below forecasts of a 25,6% rise.
”Credit figures are quite encouraging, considerably lower than expected. Money supply is slightly higher than it was before. In general, it is encouraging,” ETM analyst Russell Lamberti said.
High domestic demand has been a concern for the SARB, which is battling rising inflation, prompting repeated calls for consumers to cut their debt.
Inflation data released over the past two days has hardened the case for another interest-rate rise in August, due to SARB concerns CPIX inflation will remain outside the bank’s 3%-to-6% band for longer than expected.
The SARB’s monetary policy committee has raised lending rates by 250 basis points since June last year. It paused the tightening cycle in February and April, but raised the repo 50 basis points in June to 9,5% after a surge in inflation.
The data also showed the broadly defined M3 measure of money supply — which often points to inflation pressures building in the economy — grew by 22,67% year-on-year in May, in line with forecasts, after increasing by 22,27% in April.
Analysts said credit growth would likely continue to ease over the next few months, although this may not be enough to ward off another interest-rate increase in August.
”I think it is going to slow down quite considerably and it is possible that before the end of the year we could see growth slow down to somewhere between 17% and 20% [year-on-year],” said Colen Garrow, economist at Brait.
”But it probably won’t be enough to prevent the Reserve Bank hiking rates in August because the focus is more on inflation than developments in credit,” he added. — Reuters