South Africa’s monetary indicators showed a clear moderation in June 2024, as the broadest measure of money supply and private sector credit growth both decelerated, according to data released by the South African Reserve Bank (SARB). The M3 money supply expanded by 9.31% year-on-year, down from a revised 9.59% in May, while private sector credit growth slowed to 7.8% from 8.57% over the same period.
The slowdown in M3 — which encompasses cash, checking and savings deposits, money market instruments, and other liquid assets — marks a sustained cooling after peaking at 10.25% in March 2024. Analysts view the deceleration as evidence that the SARB’s cumulative 475 basis points of rate hikes (taking the repo rate to 8.25%) are transmitting through the economy, curbing liquidity and borrowing activity. Private sector credit extension, including mortgages, vehicle finance, and other loans, reflected weaker demand from households and businesses facing elevated interest rates and persistent cost-of-living pressures.
While headline inflation has receded to 5.2% from a 2023 peak of 7.8%, it remains above the SARB’s 3–6% target midpoint. The June figures suggest that monetary conditions are becoming less accommodative, potentially easing inflationary pressures and reducing the urgency for additional rate hikes. Financial markets will closely monitor the July and August data for signs of a sustained trend that could open the door to rate cuts later in 2024.
The moderation does not imply a credit crunch but rather a normalization phase for South Africa’s economy, which continues to grapple with structural challenges such as power outages and logistics bottlenecks. For now, the SARB is likely to maintain its cautious stance, balancing inflation risks with the need to support fragile economic growth.
