Credit demand slows to 6.2 percent in September

DATA FROM THE SA Reserve Bank (Sarb) yesterday showed that credit demand slowed to 6.2 percent in September from a near two-year high of 6.74 percent in August on the back of a moderation in the credit extended to the corporate sector.

The central bank said credit afforded to companies slowed to 7.2 percent last month from 8.3 percent in the previous month.

The Sarb blamed the slowdown in the credit extended to corporates on the muted credit uptake in the unsecured segment within the corporate lending space. September’s figures also showed that credit extended to households rose 5.1 percent year-on-year from August’s 4.8 percent.

Lara Hodes, an economist at Investec, said a credit-fuelled recovery in consumption expenditure was not expected. “Household’s debt-to-disposable-income ratio remains elevated, with many consumers significantly leveraged,” Hodes said. “This, coupled with a weak domestic economic climate, raised rates of unemployment and lacklustre sentiment, continue to weigh on consumers’ willingness and ability to spend.”

Elize Kruger, an analyst at NKC African Economics, said the sluggish economy had put a strain on the credit market.

“There is growing risk that interest rates could be adjusted upwards in the foreseeable future if second-round effects flowing from higher fuel prices and a weaker currency start to appear in generalised pricing,” Kruger said.