In December 2011, SA growth in broad money supply (M3) was recorded at 8.2%y/y, which is above the 7.2%y/y recorded in November 2011, and above market expectations for a rise of 7.6%y/y. Despite the larger than expected increase in December, the overall trend in money supply growth remains modest.
Private sector credit rose by a relatively large 0.8%m/m (R17.3bn) in December after growing by 0.5%m/m (R9.9bn) in November 2011. Consequently, on an annual basis, the rate of change in private sector credit was recorded at 6.2%y/y, largely unchanged compared with November. The reading was above market expectations for a rise of 5.9%y/y.
The increase in credit during December was relatively broad-based and included fairly significant increases in unsecured credit to households as well as instalment sales (motor vehicles). However, mortgage credit, which is the largest component of private sector credit, rose by a very subdued 0.1%m/m or R1.6bn in December. On an annual basis, mortgage credit is up only 2.5%, which is consistent with the sluggish levels of activity in the residential and commercial property sectors.
Consumer credit increased by a further R15.8bn in December (+6.7%y/y), however, the reading was distorted by a reclassification of credit card debt. This added around R5bn to the December growth in household credit. Unfortunately the historical data was not revised, but should be adjusted next month.
Based on the data available, during 2011, consumer credit rose by a total of R73.7bn, which compares with R70.7bn during 2010 and a mere R29.3bn in 2009. At the height of the SA consumer credit binge from 2005 to 2009, household debt rose by R189.2bn over a 12 month period (April 2007 to March 2008).
The annual rate of growth in consumer credit is still modest (+6.7%y/y), especially for this phase of the business cycle and the fact that interest rates are at their lowest level since 1974. Clearly, the NCA coupled with conservatism on the part of banks, have combined to keep household credit growth, most especially mortgage advances, well contained (banks are no longer offering the ‘two-below-prime” deals they did a couple of years-ago). However, the growth is unsecured credit to households remains the clear exception – especially to the lower LSM groups. Based on the BA900 returns, the growth in unsecured credit to households has been rising by in excess of 30%y/y.
Overall, the total rate of expansion in private sector credit remains modest (despite the rise in unsecured credit) and has lagged the overall economic recovery. During most economic upswings, the initial part of the recovery is driven by a rise in incomes (cash sales) and not a rise in credit. Credit demand, typically, emerges a little later in the recovery (especially if inflation starts to rise). Hence, we expect all forms of credit to continue to gain a little more momentum in 2012.
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