South Africa’s broad money supply growth slowed for a second consecutive month in July, while private sector credit expansion also cooled, according to data from the South African Reserve Bank released on Wednesday.
The M3 money supply grew 8.57% year-on-year in July, down from a revised 9.31% in June. Private sector credit growth eased to 7.41% year-on-year from a revised 7.8% in June. The slowdown indicates that elevated interest rates and persistent inflation are gradually reducing borrowing demand among households and businesses.
The SARB has held its repo rate at 8.25% since May 2023. The latest data suggests the cumulative effect of this restrictive policy is now dampening credit uptake, with softer demand likely in mortgages, personal loans, and corporate credit.
For policymakers, cooling credit and money supply growth may reduce future inflation pressure. However, it also poses risks to economic growth, as South Africa’s GDP expanded by only 0.6% in the first quarter of 2024. The SARB’s next policy meeting in September will be closely watched for any shift in stance.
