The SA Daily
28 July 2020
June PSCE likely up a bit
Shireen Darmalingam
- The SARB private sector credit extension (PSCE) tomorrow is forecast by Bloomberg consensus at 6.5% y/y, after 6.35% y/y in May (from 7.18% y/y in April). PSCE y/y growth was supported by higher financial investments and bills discounted in May.
- Credit extended to both households and corporates however remained weak in May. Growth in credit extended to households moderated to 3.6% y/y, from 4.5% y/y in April, while growth in credit to corporates slipped to 8.4% y/y, from 9.3% y/y. The long-term average for credit extended to households is around 5.2%. Credit growth to consumers has averaged 5.2% in the first five months of 2020, from 6.2% same time last year.
- Credit growth is nevertheless being somewhat supported by record low interest rates. Since January, the SARB has cut the repo rate by 300 bps — but the pandemic and loss of income imply restrained spending by all.
- The weak labour market and job uncertainty in 2020 will keep household spending subdued this year. The unemployment rate increased to 30.1% in Q1:20; it may have risen further in Q2:20 on lockdown restrictions and job layoffs in that quarter.
- Household consumption expenditure (HCE) will no doubt be adversely impacted by rising unemployment; HCE will likely contract by 10.5% in 2020 then recover to 6.5% in 2021.
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