Growth in demand for credit from South Africa’s private sector slowed to 23,13% year-on-year in July, but money supply rose above forecasts, official data showed on Thursday.
The Reserve Bank said credit expansion slowed from a revised 24,99% in June, but the broadly defined M3 measure of money supply grew 24,46%, up from 23,41% the previous month.
A Reuters poll of 15 economists predicted private sector credit growth would slow to 23,1% while the annual growth in M3 — which often points to inflation pressure building in the economy — was seen growing by 23,8% during the month.
Analysts welcomed the slowing in credit expansion but said data on Wednesday showing the main CPIX inflation gauge stayed above the central bank’s target range for the fourth month in a row at 6,5% in June, left the door open for another interest rate increase in October.
”There will probably be a bit of relief in the market after the CPI data yesterday,” said Nyiko Mageza, interest rate strategist at Absa Capital.
Faster growth in Africa’s biggest economy has been driven largely by domestic demand, but spending has pushed household debt to a record 76% of disposable income in Q1 2007, adding to inflationary pressures.
The South African Reserve Bank has increased the key repo rate by a cumulative three percentage points to 10% since June 2006, with the latest 50 basis point increase earlier this month. Some economists are predicting another rise in October.
Analysts believe a new Credit Act which came into force on June 1 and is aimed at clamping down on reckless credit providers, should also start helping to curb credit growth. – Reuters