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Wednesday, November 2, 2011

New Age Article on credit usage decrease

Below an excerpt of the article at the new Age
For the full story head to:

By: Bernard Sathekge

South African consumers and the private sector seem to be shunning credit in a sign that they have taken to heart warnings that the economy could be headed for turbulence on the back of the US and European debt crises.

The latest credit extension figures released by the SA Reserve Bank on Monday, show a slowdown in credit activity....

The lacklustre credit data was welcomed by some economists, who said it could mean households were freeing themselves from debts, while others said it could stifle economic activity. The data could also convince the Reserve Bank to leave interest rates lower for longer.


FNB chief economist, Cees Bruggenmans, said ... this trend could be a result of the new credit culture and the Credit Act. Many households were trapped in debt and were trying to get out of it.


John Loos, household and property sector strategist at FNB, said the slow rate of credit growth was encouraging, as it might contribute greatly to reducing the household sector’s high level of vulnerability to economic shocks.

“Slowing household sector credit growth may not be conducive to an improvement in housing and consumer markets’ performance in the short term, but it is a positive development for those sectors’ health in the longer term,” Loos said.

While all signals still pointed towards reduced economic growth momentum in the second half of the year, the rise in money supply reflected the price effect of elevated inflationary pressures. -

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