DEMAND for credit by the private sector (PSCE) soared last month, chalking up a record rate of increase of 25,28%, data from the Reserve Bank showed today.

It accelerated from an unrevised 25,03% in August, pointing to a still strong spending appetite despite higher interest rates.

Faster economic growth in SA has been driven largely by domestic demand, but spending has pushed household debt to record levels at almost 70% of disposable income, adding to inflationary pressures.

This has prompted the Reserve Bank to hike its key repo rate by 150 basis points to 8,5% since June and most analysts expect more increases in the months ahead.

“PSCE (private sector credit extension) again is a bit of a disappointing number,” ETM analyst George Glynos said.

“It’s high and it confirms the structural imbalances in the South African economy are very high and still require attention by the Reserve Bank.”

“This cements the case for a December rate hike and raises the possibility for a further hike in February,” he said.

During the same period the broadly defined M3 measure of money supply grew by 21,93% — in line with forecasts — after increasing by a unrevised 21,35% in August.

Consensus forecasts in a Reuters poll showed that private sector credit demand, which has helped drive a consumer spending boom, was likely to rise by 23,90% year-on-year.

Annual growth in M3 — which often points to inflation pressure building in the economy — was expected to show an annual growth rate of 21,86% during the month.