Growth in demand for credit by South Africa’s private sector slowed to 18,64% year-on-year in August, central bank data showed on Tuesday, falling below forecasts and reinforcing the view higher rates are curbing borrowing.
During the same period, growth in the broadly defined M3 measure of money supply also braked sharply to 15,42%, a near-three-year low, compared with a revised 18,51% previously.
A Reuters poll forecast private-sector credit growth would slow to 19% in the year to August from 19,81% in July, while the expansion in M3 — which often points to inflationary pressures in the economy — was seen at 17,2%.
”The money-supply growth coming in at 15,4% is very soft. So, at least there is a move in the right direction and that will confirm that the next move in interest rates is down,” said George Glynos, managing director at ETM.
”The fact that credit growth was also softer than expected also confirms the downward trend in growth and a clear response of the economy to higher rates and the NCA [National Credit Act],” he added.
The rand was unchanged at 8,32 against the dollar at 6.28am GMT, where it traded before the data was released at 6am GMT. The yield on the benchmark 2015 bond rose to 8,95% from 8,925% before.
Domestic demand has helped lift economic growth in Africa’s economic powerhouse, but has also helped fuel inflation, although it is now cooling due to higher interest rates.
The government also introduced the National Credit Act in 2007 to enforce responsible lending by commercial banks.
The central bank left its repo rate steady at 12% last month after lifting it five percentage points since June 2006, citing slowing consumer demand and a better inflation outlook in 2009.
Targeted CPIX inflation, however, remains well above the top end of a 3% to 6 % band and soared to an all-time high of 13,6% year-on-year in August.
The South African Reserve Bank’s monetary policy committee next meets to discuss interest rates on October 8 and 9. —