South African private sector credit demand growth eased to 19,81% year-on-year in July, official data showed on Friday, pointing to consumers slowly cutting back on debt as high interest rates bite.
The Reserve Bank said credit growth slowed from a slightly upwardly revised 20,39% in June, while M3 money supply growth braked faster to an almost three-year low of 18,50% from 20,28% previously.
The central bank has raised its repo rate by five percentage points to 12% since June 2006 but left the rate steady earlier this month on a better prices outlook and signs consumers are cutting back on spending.
”I think it’s a fairly mixed bag of numbers. You see money supply growth coming down quite a bit lower than consensus but we are not really seeing fast enough relief of the credit growth side,” Russell Lamberti, economist at market analysts ETM, said.
”I think we’re going to continue trending lower, but probably slower than the Reserve Bank certainly would like.”
A Reuters poll forecast that private sector credit growth would come in at 19,5% in July, while the annual growth in M3 — which often points to inflationary pressures in the economy — was seen at 19,2%.
Investment has replaced consumer spending as the main driver of growth in the economy, but the central bank remains concerns about high levels of debt, and has urged households to cut back.
Household indebtedness rose to a record 78,2% of disposable income in the first quarter of 2008.
Retail sales have been falling for the past fours surveyed months, while monthly new vehicle sales have been in decline for more than a year.
The downward trend in credit and money supply may ease some of the bank’s worries about debt as inflation nears its expected peak.
The targeted CPIX measure hit a record 13% year-on-year in July, but is seen retreating significantly in 2009, raising chances rates could come down next year. – Reuters