Private sector credit growth eased in October, coming in below expectations, mainly as a result of lower advances in investment and bills and other loans and advances.
Credit extended to the SA private sector rose by 9.34% year on year, according to the Reserve Bank. That is down from 9.74% in September when it defied expectations to increase at the fastest pace in seven years as consumers battling the cost-of-living crisis tapped their credit cards and drew down their overdrafts.
The October reading was below the consensus forecast of 9.7% in a Bloomberg survey of economists.
All the other credit categories grew on a monthly and annual basis while demand for asset-backed credit remained firm.
Data shows mortgages accelerated further to 6.3% year on year, the highest since March 2020, while instalment sales and leasing finance rose to 9%, the most since July 2014.
Instalment sales were boosted by firm demand for new passenger vehicles, supported by attractive deals and restocking by car rental companies.
Household credit demand remained resilient, growing by 7.4% compared with 7.2% a month earlier, with all the subcomponents remaining firm, with strong growth in personal loans, credit cards, and overdrafts reflecting distressed borrowing to supplement spending amid the higher cost of living.
Nedbank economist Johannes Khosa said credit growth has probably peaked in the current cycle.
“It will likely remain relatively robust in the final quarter, sustained by consumer spending during the festive season. Thereafter, household demand will moderate as the aggressive interest rate hikes take their toll on disposable income, weigh on consumer confidence and cause households to be more cautious about taking on more debt,” Khosa said.
Corporate demand would probably continue to be lifted by base effects and some improvement in private sector fixed investment, particularly renewable energy projects, he added.
“The base effect will start to dissipate. Companies are also generally still wary of accelerating capital expenditure aggressively because of lingering structural constraints, including electricity shortages, slow progress on structural reforms, and ample spare capacity in some industries. All of which are weighing negatively on business confidence,” Khosa said.
zwanet@businesslive.co.za
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