SA’ s private sector credit demand grows

from a slightly revised 5,28 percent in June, central bank data showed yesterday.
Growth in the broadly defined M3 measure of money supply slowed to 5,58 percent year-on-year compared with an upwardly revised 6,03 percent in June.
Economists surveyed by Reuters last week forecast private sector credit would be at 5 percent year-on-year in July while growth in M3 was seen braking to 5,5 percent year-on-year.
Analyst Comments
Kamilla Golda, Economist, Etm: “The credit growth numbers were sort of in line with our expectations. Private sector growth was a bit stronger. But overall, these figures show the sluggishness in monetary aggregates.
This tight environment is going to keep inflation in check and will be reflected in soft economic data. These considerations will see the Reserve Bank inclined to keep monetary policy accommodative.
“There is a risk of an interest rate cut depending on what happens abroad and the extent to which our economy slows. We see rates staying low for a long time.”
Salomi Odendaal, Economist, Citadel: “Credit growth is picking up very gradually. Obviously, consumers remain cautions about taking on credit which is understandable because debt levels are high.
“This number will not put pressure on interest rates so we do think the Reserve Bank will keep interest rates stable, for the time being.”
Market Reaction
The rand was trading at 7, 0550 to the dollar, from 7,03 before the data was released. The yield on the 2015 bond was at 6,575 percent from 6,58 percent prior to the data.
Background
Credit demand growth has been in positive territory since May last year, but its recovery has been weak and is expected to be constrained by high unemployment and an uncertain outlook for companies.
l Household debt to disposable income remains near record highs and the labour market continues to be of concern after about a million people lost their jobs in 2009. Unemployment edged up to 25,7 percent in the second quarter of this year from 25,0 percent in the first.
l Interest rates are at 30-year lows after the Reserve Bank lowered its repo rate by 650 basis points to 5,5 percent in the two years to end-2010. – Reuters.