Credit: Private sector growth rebounds

2008-06-30 00:00

Although private sector credit extension in May 2008 rebounded somewhat to 19,7% year on year (y-y) after a slow April, a deeper look at the figures reveals that overall borrowing remains under immense pressure.

Essentially, growth in leasing finance, instalment sales and mortgage advances decreased to 19% y-y in May 2008 from 19,5% y-y in April.

The growth in mortgage advances is now down to a level last seen about four years ago.

Economists are in agreement that these are clear signs that consumers have responded to the recent interest rate hikes.

Standard Bank economist, Shireen Darmalingam said that “stretched households” will ensure that demand for credit remains under pressure.

“Rising oil prices in a volatile global financial environment and a subsequent deterioration in the inflation outlook, have increased the probability of another interest rate hike in August,” she said.

Growth in instalment sales and leasing finance rebounded in May, two percentage points higher than April 2008 — at 13,6% y-y.

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