February credit growth slows, back rate cuts
March 30, 2009
Growth in demand for credit by South Africa's private sector slowed in February, central bank data showed on Monday, supporting the case for further easing of monetary policy.
The central bank cut the repo rate by 100 basis points to 9.5 percent last week, adding to 150 basis points worth of reductions since December, to boost the economy.
The central bank said on Monday growth in demand for credit by the private sector slowed to 11.05 percent year-on-year in February, from 11.85 percent in January.
During the same period, growth in the broadly defined M3 measure of money supply braked to 13.17 percent, compared to a revised 13.92 percent previously.
A Reuters poll forecast private sector credit growth would come in at 10.72 percent in February, while the annual growth in M3 - which often points to inflationary pressures in the economy - was seen at 12.25 percent.
Analysts said a downtrend in credit growth supported a case for more interest rate cuts.
"If you look at the breakdown, you see household credit growth is down.... significantly lower than a year ago. To me it's very clear that the trend is significantly downwards although the total (credit) number is higher than expected," said Elize Kruger, economist at Thebe Securities.
"I think this will be a contributing factor to the debate that we could expect more interest rate cuts in coming months. I'd say at least 50 basis points in April."
A combination of tighter lending rules enacted on June 1 2007, and relatively high levels of debt have seen banks become more cautious in their lending.
Household debt as a ratio of disposable income moderated to 76.4 percent in the fourth quarter of 2008.
Reporting by Phumza Macanda; editing by chris Pizzey
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