Credit extension data release start week off

The Reserve Bank will release the credit extension data on Monday, kicking off what promises to be a busy economic week ahead.

Total private sector credit extension picked up in May to 6.7% year on year from 5.9% in April. The improvement was driven entirely by demand from the corporate sector.

However, First National Bank economist Mamello Matikinca said household credit extension growth was expected to remain weak because households continued to deleverage and they had limited appetite for credit.

Investec economist Kamilla Kaplan projects the rate of private sector credit extension at 6.4% year on year in June, saying: “Corporate credit growth should continue to outpace household credit growth. The rate of credit extended to households has been affected by supply- and demand-side considerations. On the supply side, survey evidence showed a renewed tightening in credit criteria applied to households.

“Demand-side factors include depressed consumer confidence, high unemployment, weak income growth and deleveraging.”

Statistics SA will release tourism and migration figures on Monday.

On Tuesday, the July Absa manufacturing purchasing managers index (PMI) is expected to be released.

In June, the PMI fell below the neutral, 50 level — to 46.7.

Kaplan forecasts the PMI gauge to have lifted to 48.5 in July, remaining in contractionary territory.

“Manufacturers have identified insufficient demand as a key constraining factor, particularly from the domestic source, with export demand comparatively stronger.”

Matikinca said: “Expect the number to recover some of the lost ground in July but remain below the crucial 50 level. The domestic economy simply remains too weak to spur materially higher readings.”

Matikinca said that, in light of the fall in the June PMI, the trade surplus was expected to be smaller than the R9.5bn posted for May.

But Kaplan forecast the trade account to have remained in surplus at R10bn in June, following the cumulative surplus in the January to May period of R19.5bn.

“Export growth has been outpacing import growth, aided by the synchronised upturn in global growth and trade. The trade data has also confirmed subdued domestic demand amid depressed business and consumer confidence.”

Vehicle sales for July are also expected on Tuesday. after increasing 1.0% year on year in June.