Consumer credit-crunch continues

The National Credit Regulator (NCR) released a press statement in December 2009 titled “An ongoing upward trend in the level of debt stress.” Some highlights (or lowlights, depending which way you look at it) from the release: 

Credit bureaus held records for 18.01 million credit-active consumers [in December '09].

This compares to 17.1 million credit-active consumers in December ‘07 and 17.6 million in December ‘08.

The percentage of consumers in good standing decreased to 55.1% (9.92 million consumers) of total credit-active consumers [in December '09].

This compares to 62.4% (10.7 million consumers) in December ‘07 and 58.4% (10.3 million conusmers) in December ‘08. The 50% mark is approaching quite quickly, at which point there will be more impaired records than records in good standing.

The number of consumers with impaired records increased, to 8.09 million [in December '09]. This reflects a deterioration in the credit records of 244 000 consumers quarter-on-quarter and 990 000 consumers year-on-year.

This is an increase in impaired records to the tune of 1.64 million consumers since December ‘07.

Note the trends here: Overall number of credit-active consumers was up 2.9% year-on-year in December ‘08 and up 2.3% year-on-year in December ‘09. But the number of consumers with impaired records (who are in poor standing) rose by 13.2% year-on-year in December ‘08 and was up by 10.8% year-on-year in December ‘09. The number of consumers who are going into poor standing is far outpacing the growth in total credit-active consumers. It won’t be long then there will be more consumers with impaired records than consumers in good standing on their credit records. This means pressure will mount for further lowering of the repo rate. Couple this with Human Action’s expectation of a strong Rand in 2010 and very low CPI inflation, possibly even deflation in some months, we foresee as much as another 200 bps could be shaved off the repo rate in 2010. Don’t think for one moment we support the notion of lower interest rates in 2010, we are merely noting that the ground is becoming more fertile for intervention from the SARB in the name of monetary stimulus.