October credit growth slows to 22,27%

Growth in demand for credit from South Africa’s private sector eased marginally to 22,27% year-on-year in October, but remained high, keeping up pressure on the central bank to raise interest rates again.

Central bank data showed on Thursday credit growth slowed from 22,46% in September, while annualised M3 money supply was down at 23,39% from 24,94%.

But analysts said the slowdown of the past four months was not pronounced enough to placate the Reserve Bank’s concerns over soaring inflation and stubbornly high consumer spending.

“Credit extension is still growing rapidly. These numbers are huge despite a slowdown,” Citadel economist, Salomi Odendaal said.

“These numbers, [together] with inflation and growth, make the possibility of a interest rate hike next week a strong possibility.”

Consumer inflation data surprised on the upside on Wednesday, with the targeted annual CPIX rate jumping to a new four-and-half year high of 7,3% and further away from the top end of the central bank’s 3% to 6% band.

Economic growth numbers on Tuesday showed expansion accelerating in the third quarter, suggesting the economy has largely shrugged off 350 basis points in rate hikes since June 2006.

The Reserve Bank’s policy committee meets again next week, and is widely expected to raise the repo rate by another 50 basis points to 11%.

Credit growth has remained robust despite the higher rates and a new law, introduced in June, that clamps down on reckless lending.

It has eased slightly over the past four months, while growth in money supply—which often points to inflationary pressures—has come off a peak of 25,80% year-on-year in August. - Reuters

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