economy fails to ease credit appetite
31 July 2007

The introduction of the new National Credit Act failed to decrease South Africa’s appetite for credit, according to data released on Tuesday.

Credit extension to the private sector (PSCE) grew at a rate of 24.92 percent year-on-year from 24.84 percent in May, the Reserve Bank said. It was expected to have increased by 23.9 percent.

The rate of growth of South Africa's broad M3 money supply measure also rose above the forecast of 22.4 percent year-on-year, rising by 23.35 percent in the year to end-June from 22.67 percent in the year to end-May.

Better picture According to Russell Lamberti, economic strategist from ETM, “The numbers are not great as we would have expected more of an impact by the NCA and interest rates.” However there was some good news to come out of the figures, as they painted a “slightly better picture”, with some moderation seen over the past few months. But when you break the numbers down it paints a slightly better picture as we have seen some moderation for a number of months.

Housing market demands “Other loans and advances, a proxy for business borrowing increased quite sharply and this pulled the overall figure quite a lot. However, leasing finance, a proxy for vehicle sales came down on the month. “Instalment sales, a proxy for credit card and department store sales was marginally positive on the month, but year-on-year growth did come down.”

Fanie Joubert, economist from Efficient Group, said, “The numbers were on our expectations. The main thing is there is no real indication of the impact of the National Credit Act or higher interest rates. We are still convinced CPIX inflation will be the main determining factor for rates."

I-Net Bridge, www.business.iafrica.com