Consumer credit health improved slightly in the fourth quarter of last year amid slower increases in food prices and declines in fuel prices.
The consumer credit index by global leader in credit and information management, TransUnion, rose from 49.9 to a preliminary 50.1.
This is the first time in almost three years the index is above 50 – signalling slightly positive sentiment regarding consumers’ credit health.
However‚ TransUnion chief executive Geoff Miller cautioned against reading too much into the improvement‚ saying a weak job market and volatile rand militated against any financial improvement.
Household cash flow remained under pressure‚ despite easing due to reduced inflation pressure and a lower fuel price. Inflation slowed to 5.3% year on year in December from 5.8% in November.
Miller said consumer borrowing and repayment behaviour was fairly mixed. The decline in the yearon-year rate of new consumer loan defaults halted in the fourth quarter‚ suggesting the recent phase of improving repayment behaviour could be over.
However‚ there was no sign yet of materially worsening repayment records. TransUnion’s distressed borrowing indicator still showed some financial distress‚ but not enough to raise added concern.
Miller also said that debt service costs were effectively unchanged in the fourth quarter due to stable interest rates and steady repo and prime lending rates.
The Reserve Bank left interest rates unchanged in November and is likely to do the same next week.
The index also showed a steady rate of new consumer loan defaults‚ after more prudent lending measures were put in place in 2013.
The rate of new consumer arrears did not appear to be nearly as problematic as it was in 2012 and 2013‚ Miller said.