In April 2010, SA growth in broad money supply (M3) was recorded at a still very modest 1.67%y/y, which is marginally above the growth of 1.55%y/y recorded in March 2010, but below market expectations for a rise of 2.0%y/y. The overall trend in money supply growth is still very subdued, but given the extremely low base that has been established, the annual rate of change is still expected to slowly start to rise.
Private sector credit fell by a disappointing 0.13%m/m (-R2.528bn) in April. On an annual basis, the rate of change in private sector credit was recorded at -0.86%y/y, down from -0.69%y/y in March 2010. This was below market expectations for a decline of -0.40%y/y.
During April, mortgage credit rose by a further 0.1%m/m or R1.23 billion in the month. This is a very modest rose, although it represents the 9th consecutive monthly increase in mortgage activity, off an extremely low base. During the past nine months, the growth in mortgage activity has been a little more encouraging when compared with the preceding 4 months. In total over the period April 2009 to July 2009 mortgage credit in SA rose by a paltry R1627 million 2010 (average of R406 million a month), reflecting the fact that consumers were extremely scarce and banks applied very strict lending criteria. From August 2009 to April 2010, mortgage credit rose by a little more heartening R35bn (average of R3.89 billion a month). Some of the banks have recently announced that they have partly relaxed some of their mortgage lending criteria, which should continue to reflect in a modest pick-up in mortgage credit advances as well as residential housing activity. Furthermore, house prices have also improved, and estate agents are reporting that there are slightly more buyers in the market.
Consumer credit rose by a very modest 0.3%m/m in April and by 3.8%y/y. In the first four months of the year, consumer credit has risen by R22.23 billion (mostly in the form of mortgage finance). In contrast, corporate credit has declined by R9.36 billion over the past four months and by 5.1%y/y.
Credit demand remains extremely subdued, with only a modest improvement in consumer credit. Corporate credit remains extremely depressed. We still expected credit growth, especially consumer credit, to drift higher during 2010, as the combination of 29-year low interest rates, improved real income growth and the slightly easier lending criteria out of banks start to have a more positive effect.
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