Business Day reports:

WHILE stopping short of an outright view, economic and market analysts ETM say there is some evidence banks have taken quite a big hit from the National Credit Act (NCA), and this may have repercussions on upcoming credit extension data and hence interest rates.

“We have spoken to one or two key people and it seems to hint at the fact that credit extension and various other services may come off sharply. We may well see a sharp drop in M3 and PSCE,” economic analyst from ETM, Russell Lamberti, said this morning.

“This then ties in with lower car sales, disappointing manufacturing data, expected lower retail sales and then to the rate decision in August,” he said.

ETM had indicated in earlier commentary that if the anecdotal evidence proved to be correct arguments against further rate hikes would increase. “The sense or mood we get – while stopping short of an outright view and with it still being quite uncertain – is that there is some evidence banks have really taken quite a big hit, for example due to the bureaucratic process,” said Lamberti.

He indicated that if the Credit Act was going to have an impact then “raising by 50 basis points may be too excessive”. “However, we need to wait upon the data to see the effect,” he said.

Lamberti also mentioned there was another caveat to the view and this was that June may have been a month of teething problems due to the fact that everything was so new and banks needed to get used to the new processes. He indicated there was a chance things may stabilise down the line.

“However, for now it seems there might be a strong slowdown,” he said. “The bond market doesn’t seem to be quite factoring all of this in – if it changes then suddenly they will react,” said Lamberti.

“We will have to wait and see,” he said.