Credit demand accelerated faster than expected in August, growing 4.9% year on year, up from 3.5% in July and beating the Bloomberg consensus forecast of 4.25%.
Private sector credit extension (PSCE) data released by the SA Reserve Bank on Monday showed credit growth improved across almost all subcategories. Still, the strongest growth was in credit uptake by corporates, which comprises over half of total PSCE — that increased to 6.5% year on year from 3.7% previously.
The data reflected a general increase in business confidence, with growth in general loans, which is usually used to finance capital spending, jumping to 5.7% year on year from 4.8% and commercial mortgages accelerated to 4% from 3.7% in July, said Nedbank economists Johannes Khosa and Nicky Weimar.
The RMB/BER business confidence index (BCI) for the third quarter of 2024, which was the first business sentiment survey in SA after the formation of the government of national unity (GNU), rose by three points to 38 — the best level since the fourth quarter of 2022, when confidence was also at 38 points.
According to RMB, the improvement in sentiment was probably supported by a continued absence of electricity supply disruptions and political certainty after the election.
Household credit demand, however, remained under pressure the PSCE data showed.
According to Nedbank household credit demand slowed further to 3.1% year on year from 3.2%.
This reflected the effects of “higher interest rates, weak consumer confidence, strained household finances and tighter lending standards among commercial banks”, Khosa and Weimar said.
Growth in home loans was unchanged at 2.5%, while personal loans contracted for the fifth consecutive month, down 1.1%. Credit card usage remained relatively robust, growing by 9.8%, albeit slightly softer than 10.6% in July.
According to the latest FNB/BER Consumer Confidence Index, persistently high inflation and interest rates have weighed heavily on household finances for the past two years. However, the SA Reserve Bank’s decision to cut the repo rate by 25 basis points to 8% in September, the high likelihood of more interest rate cuts in the coming months, and sustained moderation in inflation have added to the improvement in consumers’ willingness to spend, especially in higher-income groups.
This helped lift the index to a five-year high in the third quarter.
Weimar and Khosa said they expected household credit demand to improve in the coming months.
“Lower inflation will boost real disposable income, debt service costs will ease as interest rates fall, and the two-pot system will give households access to a portion of their retirement funds. These developments will gradually reduce the strain on household finances, boosting consumer confidence and spending,” they said.
The outlook for corporate credit was more uncertain and company loan growth would be likely to remain volatile and subdued during the rest of the year.
“Fixed investment is only expected to turn the corner in 2025 as the domestic economy gains more upward traction, global growth picks up some pace, and the general operating environment improves further.”
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