Bloomberg News

South Africa Credit Growth Slows to 5.5% as Recovery Falters

November 01, 2011

(Updates with comment by analyst in third paragraph, rand in sixth.)

Oct. 31 (Bloomberg) -- South African credit growth slowed to 5.5 percent in September from a year earlier, adding to chances the central bank will keep the benchmark lending rate at a 30-year low next month to support economic growth.

Th rate of expansion in lending to households and businesses fell from 6.06 percent in August, the Pretoria-based Reserve Bank said on its website today. The median estimate in a Bloomberg survey of 11 economists was 5.9 percent.

“As credit growth remains weak and growth is likely below trend, the SARB is likely to delay or play down hiking fears,” Carmen Nel, an economist at Rand Merchant Bank, said in a phone interview from Cape Town. “It is likely that they will keep the rate on hold through 2012.”

The Reserve Bank kept the benchmark rate at 5.5 percent last month as consumer confidence slipped and after the economy expanded at the slowest pace in almost two years in the second quarter. Gross domestic product grew an annualized rate of 1.3 percent as manufacturing and mining output contracted.

The consumer-sentiment index dropped to a two-year low of 4 in the third quarter, First National Bank said on Sept. 12. Growth in household spending slowed to an annualized 1.3 percent in the second quarter from 7.9 percent in the previous three months, the central bank said on Sept. 13.

The rand weakened 1.5 percent to 7.8403 against the dollar at 8:20 a.m. in Johannesburg, extending the year’s decline to 16 percent, the worst performer among 16 major currencies tracked by Bloomberg. The yield on the benchmark bond due in 2015 was little changed at 6.56 percent. The yield has dropped 79 basis points this year.

The broad M3 measure of money supply accelerated to 6.8 percent in September from a year earlier, the central bank said. The median estimate in a Bloomberg survey was for M3 to expand 6.6 percent.

--Editors: Gordon Bell, Ana Monteiro

To contact the reporter on this story: Andres R. Martinez in Johannesburg at amartinez28@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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