Credit growth rises in August

CREDIT growth in the domestic private sector in August 2015 rose to 8.60% year on year from 8.38% year on year in July, South African Reserve Bank figures released on Wednesday showed.

Economists had expected private sector credit extension (PSCE) growth to have remained broadly unchanged, particularly after the Reserve Bank hiked rates by 25 basis points in July, which was likely to dampen consumer appetite for credit.

Total credit extension in August was at 10.41% year on year from 9.93% year on year in July.

Credit extension data give an indication of the credit uptake by households and the private sector.

The rate of growth in SA’s broad M3 money supply declined to 10.02% year on year in August from 10.25% year on year in July.

Money supply reflects the amount of money circulating in the economy.

When money supply increases, it typically increases the availability of loans, which individuals and businesses use to make purchases. The higher the money supply growth, the higher the growth in available funds. On the contrary, if money supply growth slows, it can have a negative effect on economic growth.

If the money supply grows much faster than the economy, then rapid inflation ensues, and people lose faith in the value of the money.



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