Credit demand on the up

By Staff Writer

Credit demand by South Africa's private sector rose by 5.11% year-on-year in October, compared with a slightly revised 4.44% in September, central bank data showed on Monday.

Growth in the broadly defined M3 measure of money supply accelerated to 6.36 percent year-on-year compared with 5.08 percent in September.

A Reuters poll last week showed private sector credit demand was seen growing by 5.2% year-on-year in October. Money supply growth was seen at 5.9%.

"We have started to see a steady recovery in credit, however, it still remains relatively weak for where we are in the cycle and given the fact that rates are near historic lows," Carmen Altenkirch, senior economist at Nedbank.

"So we haven't seen a pickup in demand with rates so low and the main reason for this is consumers remain relatively highly indebted; and the other factor is job insecurity.

"I don't think these numbers will sway the rates decision by the central bank one way or another. We think rates will remain flat."

The demand for credit has steadily been on the rise since May, but at a subdued pace after 2009's recession, which has led to the loss of more than a million jobs since the beginning of last year.

It is, however, expected that the credit demand will remain weak as households continue to struggle with high levels of debt.

"(Credit growth) continues to be driven by the household sector which is growing at 6.6 percent year-on-year in October after 6.3 percent the prior month," said Jeffrey Schultz, macro strategist at Absa Capital.

"Growth in credit to corporates, however, remains the laggard ... showing business in general is relatively tentative and hesitant to take on a significant amount of credit in the current environment."

Recent Articles

Featured Why "insurance fronting" for your children is a bad idea

We examine the consequences of “insurance fronting” for your children and investigate legal ways to decrease your children’s premiums in South Africa.

Are you paying too much in bank fees?

We find out how you can bank with savvy, to best manage fees and charges.

What’s the minimum income for a car loan?

When you apply for vehicle finance, your lender will consider several factors when assessing your application, including your income.

Why do you need life cover?

Life cover is a necessary expense that many may overlook. We consider how it differs from funeral cover, and how to choose the correct cover.


Latest Guide

Guide to debt rehabilitation solutions