THERE was a modest rise in credit extension growth in June, but the overall trend in money supply growth is still very subdued, economists say.

Data released by the Reserve Bank yesterday showed that credit extension to the private sector grew at a rate of 0.92% year-on-year (y/y) in June from 0.8% y/y in May.

The consensus forecast among economists was for 1% y/y growth.

The rate of growth of South Africa’s broad M3 money supply measure rose by 2.41% in the year to end June from 1.4% in May and compared with the expected 2.3% y/y.

Total domestic credit extension grew at a rate of 1.14% in June from 1.02% in May, while total loans and advances recorded 1.25% y/y growth in June from 1.40% in May.

The data shows that household credit demand has begun to edge up slightly.

This is an indication that some consumers’ appetite for credit is slowly ticking up in a low interest rate environment and easier lending criteria from financial institutions.

Stanlib economist Kevin Lings noted that overall credit demand remained relatively subdued, with only a modest improvement in consumer credit.

However corporate credit remained relatively depressed despite the modest increase in June this year.

Investec Group economist Kgotso Radira noted that while PSCE was expanding, albeit at a marginal pace, credit demand remained weak, as would be expected with debt levels near 80% of disposable incomes and rising unemployment.

Standard Bank economist Danelee van Dyk noted tentative signs that growth in credit extension was improving.

However the loss in domestic growth momentum in the second half of the year was a harbinger of weak growth in credit extension, she predicted. – BusinessLive