credit card chip XXX Picture: THINKSTOCK
credit card chip XXX Picture: THINKSTOCK

Money supply and credit growth slowed unexpectedly in October, which may be an indication that banks are getting tougher on loan applications.

The Reserve Bank reported on Thursday morning that annual growth in private-sector credit extension slowed to 5.8% in October from 6.3% in September, instead of rising to 6.5% as economists had expected.

Investec Bank economist Kamilla Kaplan tied the Reserve Bank's figures to recent data from the National Credit Regulator (NCR), which showed the rejection rate of new credit applications received rose to 50.1% in the second quarter from 48.5% in the first quarter.

"This could suggest that financial institutions have tightened credit criteria towards households," Kaplan said in a note e-mailed on Thursday. 

Absa Home Loans economist Jacques du Toit said the portion of unsecured household debt had been steadily rising over the past decade.

Image: Absa

Household unsecured credit amounted to R381.2bn in October, 23.7% higher than in the same month in 2017.

"Growth in all three components of unsecured credit balances — general loans and advances, credit cards and overdrafts — remained on a marked upward trend since the start of the year," Du Toit said in a note e-mailed on Thursday.

Household secured credit came to R1.2-trillion in October, 4.4% higher than in October 2017.

Overall credit growth was dragged down by corporate credit growth easing to 6.3% in October from 7.2% in September.

The Reserve Bank also reported that annual growth in money supply (M3) moderated to 6% in October, lower than the market forecast of 7.2% from 7% in September.

Nedbank's economic team said this slowdown was unexpected.

"Today’s figures suggest that the recovery in spending growth remains moderate and that general economic activity is still subdued," Nedbank said in an e-mailed note.

"With demand‐pull inflation remaining contained and energy prices easing significantly, inflation is likely to fall into 2019, only rising again more convincingly in early 2020. We think that the monetary policy committee will therefore keep rates on hold until late 2019, when the mild upward cycle will resume."