February credit growth slows to 20,79%

Growth in demand for credit from South Africa’s private sector slowed to 20,79% year-on-year in February, lower than expectations and easing pressure for an interest-rate hike next week.

The central bank said on Wednesday private sector credit extension slowed from a revised 23,06% year-on-year in January, while the M3 money supply growth also fell, to 21,07% from 25,24% year-on-year in January.

Credit demand was lower than market expectations of 21,48% and M3 money supply was also slower than the consensus of 22,28 in a Reuters poll.

The Reserve Bank left its key repo rate flat at 11% in January, after raising it by 400 basis points between June 2006 and December last year.

But inflation continues to accelerate and central bank Governor Tito Mboweni was hawkish when he spoke in Parliament last week, saying the economy was not in danger of being strangled by higher interest rates.

Some analysts said the data showed tighter monetary policy was having the desired effect on indebtedness, and the central bank should not hike rates.

“The slowdown is good, it is adding weight to calls for the Reserve Bank not to hike rates next week,” said Colen Garrow, economist at Brait Merchant Bank.

“Additional momentum behind the view is that the consumption side of the economy is slowing fast. To hike rates would be a bit too much,” he said.

But the data may not be enough to deter the central bank after CPIX inflation reached a five-year high of 9,4% in February, much higher than the 3% to 6% target band.

“I still think given the very high inflation figures, this cooling is not enough to provide a counter,” said Fanie Joubert, economist at Efficient Group.

The central bank’s Monetary Policy Committee meets on April 9 and 10.

The rand was almost unchanged after the data at 7,97 to the dollar at 6.30am GMT, from 7,9725 before the data. The yield on the 2015 bonds was lower at 9,125% from 9,155 before the data.
- Reuters

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