By Ntsakisi Maswanganyi
The latest credit figures are a positive sign that domestic demand is improving and that the economy should manage better growth levels in 2012, Gina Schoeman, Absa Capital economist says.
South African Reserve Bank (SARB) figures, released on Monday, show that credit extended to the private sector grew at a higher than expected rate of 9.16% year on year (y/y) in March from 7.92% y/y in February. A survey by I-Net Bridge expected an 8.53% y/y growth.
The latest credit figures suggested that credit extension was continuing to pick up gradual momentum, and pointed to an increased chance of some tightening in monetary policy, according to Nedbank economists.
The rate of growth in the broad M3 money supply measure rose by 6.65% y/y in March from 5.89% y/y in February. Expectations were for M3 to increase at 6.4% y/y.
Schoeman said that the continued recovery in private sector credit extension was comforting, especially because it was not being driven purely by the consumer.
Credit extension to corporates recorded 11.9% y/y growth from 9.4% y/y, while household credit growth was at 6.8% y/y from 6.6% y/y.
Absa Capital said that the lacklustre state of mortgage advances was holding back credit momentum in the household sector, as this component made up 65% of overall household credit.
Excluding mortgage advances, household credit was growing at 16.8% y/y, Schoeman said.
Tebogo Mosepele, economist with Standard Bank Research, said that credit extension in March was mainly driven by other loans and advances, which contributed 6.4 percentage points to the y/y growth in credit extension.
The overall trend in private sector credit remained modest, although there was concern regarding the uptick in unsecured lending, Mosepele said.
Standard Bank Research expected credit extended to the private sector to continue to grow at a slower pace in 2012.
Consumer and corporate credit uptake should remain cautious against the backdrop of fragile economic conditions, high unemployment and low consumer confidence, Mosepele said.
Total loans and advances, which is PSCE excluding investments and bills discounted, recorded 9.16% y/y growth in March from 8.13% y/y growth in February.
Total domestic credit extension amounted to 9.27% in March from 6.72% in February.
The SARB also indicated that its international liquidity position fell to US$48.912 billion in March from $49.639 billion in February.
Nedbank economists noted that it was not yet clear whether the improving trend in credit extension figures would be sustained in the coming months, with the current cycle already having lost momentum on several occasions.
"We still think that the underlying global and domestic environment remains more vulnerable than recent indications suggest and that the MPC [monetary policy committee] will delay its first hike in interest rates to late in the year," they said.
