Private sector credit in SA grew 4.6% in April compared with a year ago and stayed ahead of inflation, which was 2.8% in the same month.
That is according to the SA Reserve Bank’s latest data released on Friday.
But while the year-on-year numbers show stronger growth, the total value of credit fell slightly from March, dropping by 0.23%. This pullback followed a strong rise of 1.81% the month before.
The dip came mostly from a 0.5% fall in corporate borrowing, while credit to households rose by 0.1%.
Economists said the overall picture was mixed: some areas are improving, but others are still showing weak demand.
Private sector credit extension is a core indicator of economic momentum. It measures the total value of credit extended by banks to households and corporates and reflects the willingness of banks to lend and the confidence of consumers and businesses to borrow.
The latest year-on-year data exceeded Nedbank’s expectation that private sector credit would rise modestly to 3.8% in April. However, the outcome was broadly in line with Investec’s forecast of 4.5% year on year.
Household credit grew by 3% year on year in April, up from 2.9%.
Growth came mainly from credit cards and overdrafts, while mortgage lending remained unchanged at 2.3% and vehicle finance held steady at 6.2%.
The slow recovery reflects subdued consumer confidence due to the economy's poor performance, a mounting tax burden and the persistent pressure from relatively high interest rates.
“The slow recovery reflects subdued consumer confidence due to the economy’s poor performance, a mounting tax burden and the persistent pressure from relatively high interest rates,” Nedbank said.
“A further 25 basis point cut in interest rates announced by the Reserve Bank should support the property market, though consumer sentiment remains highly subdued,” Investec economist Lara Hodes said.
On Thursday, the Bank cut interest rates to 7.25%, bringing the prime lending rate to 10.75%.
But Oxford Economics chief economist Jee-A van der Linde said there was limited scope for the Bank to lower rates in the near term.
“Our modelling suggests another 50 bps in cumulative rate cuts can be expected later this year and next.”
Company loans, which account for just more than half of all private sector credit extension, rose 7.48% year on year, exceeding Nedbank’s forecast of 6.2%.
Part of the year-on-year growth came from a bounce in overdrafts, which rose 12.6%, recovering from a big drop in April 2023.
“This acceleration is somewhat deceptive, driven mainly by a resurgence in company overdrafts off a very low base in the same month a year earlier,” Nedbank noted.
General purpose loans also saw annual growth, but that too was helped by the low base a year ago.
Besides these two large categories, corporate demand for most other credit products remained subdued, Nedbank said, describing credit demand overall as “patchy” in April.
“We expect demand to pick up more convincingly during the year’s second half. Household loan growth should increase as real incomes rise and interest rates decline a little further.
“The interest rate cut will lift consumer spirits and boost their willingness to borrow. We also expect company loan growth to improve as the economic recovery regains some traction and starts to place some pressure on existing capacity.”
This comes as SA salary earners experienced another dip in take-home pay in April, marking the second consecutive month of decline amid mounting global and domestic uncertainty.
According to the latest BankservAfrica take-home pay index released last week, the average nominal take-home pay declined by 2% month on month to R17,495 in April, down from R17,846 in March.
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