KNOCK ON EFFECT

Growth in private sector credit falls more than expected as corporates battle |

THE SOUTH African Reserve Bank (SARB) said yesterday that growth in private sector credit fell more than expected last month amid the downturn in the corporate sector.

Data from SARB said private sector credit slid by 1.76 percent year-on-year in April following a 1.52 percent drop in March, missing market expectations of a 0.9 percent decline.

The notable decrease was underpinned by the corporate sector, which comprises more than half of total credit and declined by 6.7 percent in April compared to 5.3 percent in March.

The unsecured credit segment, comprising mainly general loans and advances and is the largest component within the corporate lending space, fell by 9.7 percent compared to 8.4 percent in March.

A subdued economic environment and uncertainty around the timing and strength of a recovery continued to dampen business confidence levels while hindering corporate sector activity.

Conversely, household credit growth increased to 4.7 percent yearon-year in April from a prior 3.3 percent.

The SARB said the increase in household credit growth was mainly linked to asset-backed finance, with mortgage advances rising by 5.6 percent from 4.4 percent in March.

Investec economist Lara Hodes said statistical base factors were partly responsible for April's marked decline.

Hodes said rates of household unsecured credit extension, however, remained subdued in April.

She said the residential property market had benefited from the historically low interest rate environment and the shift to a work-from-home culture.

“Indeed, households' balance sheets remain under pressure, with financial uncertainty still elevated, restricting the take-up of new loans,” Hodes said.

“A rebound in growth and investment, supported by a pick-up in confidence, will be impacted by the timeous, successful roll-out of the vaccine.”

Meanwhile, expansion in the broadly defined M3 measure of money supply advanced by 2.02 percent in April, easing from a 3.62 percent rise in March.