SA credit growth eases

Private sector credit growth eased in October, coming in below expectations, mainly as a result of lower advances in investment and bills and other loans and advances.

Credit extended to the private sector rose 9.34% year on year, says the Reserve Bank. That is down from 9.74% in September when it defied expectations to increase at the fastest pace in seven years as consumers battling the cost-of-living crisis tapped credit cards and drew down overdrafts.

The October reading was below the consensus forecast of 9.7% in a Bloomberg survey of economists.

All the other credit categories grew on a monthly and annual basis while demand for assetbacked credit remained firm. Mortgages rose 6.3% year on year, the highest since March 2020, while instalment sales and leasing finance rose 9%, the most since July 2014.

Instalment sales were boosted by demand for new passenger vehicles, supported by attractive deals and restocking by car rental companies.

Household credit demand remained resilient, growing 7.4% compared with 7.2% a month earlier, with all the subcomponents remaining firm, with strong growth in personal loans, credit cards, and overdrafts reflecting distressed borrowing to supplement spending amid the higher cost of living.

Nedbank economist Johannes Khosa said credit growth has probably peaked. “It will likely remain relatively robust in the final quarter, sustained by consumer spending during the festive season.” Then household demand will moderate due to as interest rate hikes.

“The base effect will start to dissipate. Companies are also generally still wary of accelerating capital expenditure aggressively because of lingering structural constraints, including electricity shortages, slow progress on structural reforms, and ample spare capacity in some industries. All of which are weighing negatively on business confidence,” Khosa said.