R27bn credit shrinkage shows recession continues
Ethel Hazelhurst of Business Report :
“Credit figures released yesterday signal that the recession continued into the second quarter, after the economy contracted sharply in the first.
Reserve Bank data showed that private sector credit extension (PSCE) fell by R27 billion in May – the largest monthly decline on record, according to Efficient Group economist Fanie Joubert.
Year-on-year growth in PSCE fell to 5.7 percent in May, way below an expected 8 percent and sharply down from 20 percent growth a year earlier.
Credit growth slowed despite a 4.5 percentage point cut in interest rates since December.
Arthur Kamp, an investment economist at Sanlam Investment Management, said the figures pointed to no recovery until the end of the year.
Brian Kantor, a strategist at Investec Private Client Securities, called on the Reserve Bank to pump more money into the system to get the economy going, saying: “Interest rate cuts are not enough.”
The credit figure shows householders are reluctant to take on new debt or unable to meet the stricter lending criteria of banks.
The total figure masks the extent of the damage.”
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