Bloomberg News

South African Credit Growth Little Changed at 5.25% in June

July 29, 2011

(Updates with economist comment in fourth paragraph, rand in fifth.)

July 29 (Bloomberg) -- South African credit growth was little changed in June as rising unemployment and weak manufacturing and retail sales damped consumer appetite for loans.

Borrowing by households and businesses rose 5.25 percent from a year earlier, compared with a revised 5.22 percent in May, the Pretoria-based Reserve Bank said on its website today. The median estimate of 16 economists surveyed by Bloomberg was 5.3 percent.

South Africa’s unemployment rate, the highest of 61 countries tracked by Bloomberg, increased to 25.7 percent in the second quarter, Statistics South Africa said yesterday. Manufacturing, which makes up 15 percent of the economy, grew 0.6 percent in May from the year earlier, the statistics office said on July 12, while retail sales were unchanged in the same period.

“Modest growth in credit demand, combined with deteriorating conditions in the labor market, suggest that there is likely to be little demand pressure on prices as both households and businesses remain cautious,” Carmen Altenkirch, an economist at Nedbank Group Ltd., said in e-mailed comments.

The rand traded at 6.782 at 10:17 a.m. in Johannesburg, down from 6.7545 before the release of today’s data.

The central bank’s monetary policy committee left its benchmark interest rate unchanged on July 21 for a fourth consecutive meeting, after cutting it three times last year to 5.5 percent.

‘Clear Evidence’

“The Monetary Policy Committee is unlikely to tighten monetary policy until there is clear evidence of a sustained and more rigorous pickup in consumer spending,” Altenkirch said.

Advances to households rose 7 percent in June from the year before, while the growth in corporate credit demand remained unchanged at 3.7 percent, the central bank said.

The central bank “expects household consumption expenditure to be constrained by a number of factors, including subdued credit market conditions,” Governor Gill Marcus said in the capital, Pretoria, on July 21. This is reflected in the “high levels of consumer indebtedness, which measured 77 percent of personal disposable income in the first quarter.”

The broad M3 measure of money supply increased 6 percent in June from the year earlier down from 6.2 percent in May, the central bank said. The median estimate in a Bloomberg survey was for M3 to expand 6.4 percent.

--Editors: Karl Maier, Philip Sanders

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net.

To contact the editors responsible for this story: Philip Sanders in London at psanders@bloomberg.net.


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