SA’s private sector credit grew in June, marking the 12th consecutive month of increases, the SA Reserve Bank said on Friday.
The Bank’s report shows that private sector credit extension grew by 7.53% year on year in June, beating Bloomberg’s median estimate of 5.86%. The increase follows 5.34% growth a month earlier and is the strongest pace since March 2020.
The data also shows the nominal increase in credit extended to the private sector in June was R68.0bn compared with a much smaller increase of R4.3bn in the previous month.
Credit extended to the corporate sector rose to 8.1% year on year in June from 4.5% in May, mainly driven by increases in general loans, advances and overdrafts, the data showed.
Credit extended to households rose more moderately in June to 6.8% year on year from 6.4% in the previous month. This was largely because of higher mortgage advances and instalment sale credit.
Oxford Economics economist Gerrit van Rooyen said the uptick in private sector credit extension was mainly driven by base effects and an increase in the appetite for corporate sector credit, which has bounced back since the start of the year as a result of the easing of Covid-19 regulations.
He said corporate credit demand continued to recover from the slump induced by the Covid-19 pandemic, which caused many businesses financial distress and sapped corporate credit demand.
In late June, SA dropped its remaining coronavirus-related regulations, such as wearing masks indoors and the limits on gatherings.
“This will be a major boost for businesses in the entertainment and hospitality sectors,” he said.
He added that even though household credit growth broadly remained in step with inflation, “the steep rise in interest rates, which saw an increase of 175 basis point rise since January, will likely start to dampen household credit demand, especially in light of moderating economic growth and disposable incomes.”
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