Growth in demand for credit by South Africa’s private sector slowed more than expected in September from a year earlier, rekindling talk of another interest rate cut to help struggling companies and households.
The rand fell slightly and bonds rose after the central bank said on Thursday that growth in demand for credit slowed to 1,49% in September from a year earlier, its weakest pace in more than 40 years and down from 2,34% in August’s data.
During the same period, growth in the broadly defined M3 measure of money supply braked to 4,0% from 5,49% previously.
Both figures were much lower than market expectations of 2,25% and 4,95%, respectively.
Household finances have been under pressure as South Africa languishes in its first recession since 1992. In an effort to stimulate the economy the central bank has cut interest rates by 500 basis points since December.
Ian Marsberg, macro strategist at Absa Capital, said the data showed little evidence lower rates had lifted demand for credit.
”It’s still a reflection of both households’ and corporates’ ability and willingness to take on credit that’s still being constrained in the current economic environment,” he said.
Household debt levels remain high and consumers are insecure about their jobs. Consumer spending largely driven by debt fuelled economic growth between 2003 and 2007.
”The credit numbers are quite weak. I think it’s starting to sketch the background for another rate cut, technically,” said Colen Garrow, economist at financial services group Brait.
”At 1,49%, I think the numbers are much weaker than I think the Reserve Bank would like them to be. In this market we need more robust figures to show the economy is moving, growth is moving.”
The rand was trading at 7,8450 against the dollar at 06.55GMT, from 7,8180 before the data was released at 06.00GMT. The yield on the 2015 bond fell to 8,57%, from 8,64%. — Reuters