Demand for private sector credit declining

FIGURES from the SA Reserve Bank yesterday showed that South Africa’s private sector credit in October recorded its smallest increase since March.

The central bank said demand for credit in the private sector in October declined to 5.43 percent, just below the 5.5 percent rise in the preceding month.

Private sector credit measures year over year change in the bank lending to the domestic private sector.

S&P Global Ratings last week said that, excluding agriculture and mining, South Africa’s services-dominated economy was barely growing.

“The private sector is investing less than the depreciation of the capital stock. On a per capita basis, consumption is declining,” S&P said.

Macroeconomic statistics website Trading Economics said private sector credit in South Africa averaged 13.94 percent from 1966 until 2017, reaching a record high of 35.88 percent in July 1981 and a record low of -2.35 percent in May 1966.

The poor numbers in private sector credit extension come on the heels of the disappointing business confidence data that came out this week.

Hammering The RMB/BER Business Confidence Index fell one notch to 34 points in the fourth quarter, with retail sentiment taking a hammering.

The RMB/BER data showed that retail confidence dropped by 9 points to 29 points – a level last seen 18 months ago.

Meanwhile, the central bank said yesterday that South Africa’s money supply growth eased at a faster-than-expected pace in October.

The broad money supply, or M3, climbed 5.01 percent yearover-year in October, slower than the 7.13 percent rise in September.