Credit extensions lowest in 3 years

2008-09-30 00:00

The latest credit extension and money supply figures released yesterday could convince the Reserve Bank to keep interest rates steady when its monetary policy committee meets next Thursday, according to economists.

The growth in M3 money supply in August 2008, the country’s broad money supply indicator and a possible indicator of future inflation data, was significantly softer at 15,42% year on year — its lowest level in three-and-a-half years — from 18,5% in July 2008.

Furthermore, credit extension to the private sector in August 2008 took a knock, declining 18,64% year on year from 19,81% in July 2008 and 20,39% in June 2008.

Standard Bank economist Shireen Darmalingam observed that credit-active consumers are generally feeling the pinch of the tighter economic environment.

“The percentage of consumers with impaired or tainted records [with the Credit Bureau] increased to 38,44% in March 2008 from 36,4% in June 2007.

“In terms of the actual number of impaired records, 140 000 more consumers had been unable to meet their debt repayments by the end of March 2008 compared to the end of the final quarter of 2007,” he said.

“The Credit Bureau reported that there were just over 58,12 million accounts listed on their databases at the end of March 2008. This compares with the 51,93 million accounts listed at the end of June 2007,” she added.

Rising interest rates and the National Credit Act continue to hurt mortgage growth, which came in at 17,6% year on year in August, compared with a 19,1% year-on-year growth rate in July 2008.

According to Darmalingam, this is the lowest growth in mortgage advances since June 2004.

However, Efficient Group economist Fanie Joubert said households continue to “indulge” in certain categories of credit.

“Other credit — including credit cards and overdrafts — to the value of R4 billion was extended during August, more than the R3,1 billion in July. This item remains stubbornly high and recorded the strongest rise among the major credit items.”

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