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Demand for credit from the private sector soared to a 17 year high of 25,28 percent in the year to September, raising inflation concerns and increasing expectations of interest rate hikes into next year, shows data released yesterday.
Credit growth grew from 25,03percent in August and came in above expectations of 23,9 percent, demonstrating a strong spending appetite despite the higher interest rates.
Faster economic growth has been driven largely by domestic demand, but spending has pushed household debt to record levels, at very nearly 70 percent of disposable household income, adding to inflationary pressures.
This has helped prompt the reserve bank to hike its key repo rate by 1,5 percent to 8,5 percent since June and most analysts expect more increases to come as inflation ticks towards the upper end of the 3 percent to 6 percent target band.
Brait economist Colen Garrow said: "The credit extension figures support the outlook that we should get another rate hike in December and then probably again in February. The numbers are stubbornly high. We still have the Christmas buying spree to come, which will largely be financed by credit."
Last week's Reuters poll of 17 strategists concluded that interest rates would rise half a percentage point in December as the bank tries to prevent a breach of its inflation target.
Economists said solid economic growth of nearly 5 percent of gross domestic product would continue to lift credit and money supply growth, putting pressure on the bank to rein in spending.
"Favourable macroeconomic fundamentals have continued to support money supply and credit extension growth over the past few months," said Standard Bank analyst Shireen Darmalingam.
"And, with robust economic activity and strong business and consumer confidence, the overall performance will continue to support brisk growth rates in monetary indicators," she said.
Demand for home loans, the biggest component of private sector credit demand, eased slightly but maintained a rapid pace.
Mortgage advances rose by a yearly rate of 29,6 percent last month, compared with 30,3 percent in August, though the growth was expected to slow.
During the same period the broadly defined M3 measure of money supply grew by 21,93percent, in line with forecasts. - Reuters