Nedbank: Money supply and credit

30 Dec.

Nedbank Economic Commentary: Money supply and credit.

Credit demand growth just keeping pace with inflation.

• Credit demand continued to expand roughly in line with inflation in November. The 6,2 % annual increase was slightly above the consensus expectation of 6,1 %, but remains very modest for this point in the business cycle. Money supply growth of 7,2 % was marginally below our own and the market’s expectations.
• Credit extended to households rose by 5,4 % y-o-y from 5,3 %, while credit extended to companies eased to 6,8 % from 7,0 %.
• Categories that continued to do relatively well were instalment sales and leasing finance (up 6,0 %) and unsecured credit (up 12,6 % and driven mainly by personal loans). In contrast, mortgage advances rose by just 1,9 %, reflecting the weak housing market and banks’ reluctance to extend long-term loans given higher liquidity costs.
• Credit growth is expected to remain relatively subdued in 2012, held back by uncertain global prospects, increased regulatory demands and existing high personal debt.
• These figures continue to suggest that underlying demand for credit remains weak and is therefore unlikely to concern the Monetary Policy Committee. With the economy growing only modestly and downside threats still significant, but inflation at or around the 6 % upper target limit, we expect that the Reserve Bank will start to tighten policy only in the fourth quarter of 2012. …

See the full Commentary