SA’s private sector credit extension (PSCE) rose modestly in May supported by firmer corporate borrowing while household demand for credit remained restrained.
According to data released by the SA Reserve Bank on Monday, claims on the domestic private sector — a broad measure of lending activity — totalled R4.91-trillion in May. This represented a 0.6% increase from April and a 5.0% rise from the same month a year earlier.
PSCE indicates the financial system’s health and is a barometer of underlying economic momentum. Sustained increases in credit typically point to rising confidence among both lenders and borrowers, supporting consumption and private sector investment.
Credit uptake by corporates, which constitutes more than half of total private sector credit, expanded by 0.8% month on month and 6.6% year on year (up from April’s 5.9%), reflecting an appetite among businesses to finance operations and investment.
Detailed trends show within corporate credit, unsecured general loans and advances — which make up nearly half of all credit extended to companies — rose by 2.6% month on month and 9.0% year on year, reversing a contraction recorded in April.
By contrast, mortgage advances to corporates, which constitute about 23% of corporate borrowing, increased only 0.2% over the month.
Household borrowing, however, continues to lag behind corporate credit.
While detailed household breakdowns showed small gains in categories such as mortgage advances and instalment sale credit, overall growth in loans and advances to households remained comparatively subdued.
In the household segment, credit demand increased by a modest 0.3% month-on-month, lifting annual growth to 3.1% from 3.0% previously.
Mortgage advances, which account for 58% of household credit, edged higher.
“The further 25 basis points cut in the repo rate announced by the Reserve Bank in May, with an additional cut projected in the fourth quarter should support the property sector,” said Investec economist Lara Hodes.
“According to the results of FNB/BER Building Survey for the second quarter, non-residential building demand came under further pressure during the quarter,” she said.
The FNB/BER Building Confidence Index slipped by five points to 36 during the second quarter, indicating that most firms remain dissatisfied with current operating conditions.
While activity in the non-residential construction segment decreased, it continued to track above its historical average.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.