While the building approvals data for September showed a tiny bit of ‘light’ for worried policymakers with signs of a steadying of approval levels for apartments, units etc (albeit at low levels) and a small pick up in approvals for private homes, the credit data for the same month from the Reserve Bank was bad.
Lending to business grew at just 3.3% in September, down from 3.5% in the year to August after a rise of just 0.2% rise in the month from August and unchanged).
A year ago lending to business was growing at the respectable rate of 4.4% and started 2019 with bank with lending growing by a ‘heady’ 5.1% annual rate in January.
Perhaps it’s a sign of the tougher lines banks are taking on small and medium business credit in the wake of the Hayne royal commission into banks and financial services. Perhaps it’s also a sign of slowing credit provision to property developers.
But given the growing level of stagnation throughout the economy, the sluggish growth of lending to business is not surprising – in fact its an indicator of what is happening elsewhere. In fact, business lending has slowed from a 4.1% growth rate in June to the September reading of $3.3.
The RBA data also showed that the value of private sector housing credit grew 0.24% (0.2% rounded down) in September after seasonal adjustments, seeing the annual growth rate fall to a fresh record low of 3.05% (3.1% rounded up).
Owner-occupier credit grew 0.44% (0.4%) over the month, and by 4.76% (4.8%) over the year. The annual pace of growth was almost identical to the level reported in August, suggesting some areas of home lending could be bottoming out.
But lending to investors continued to slide, falling 0.12% (0.1%) over the month and 0.14 (0.1%) over the year. September marked the first month on record that investor credit fell on an annualised basis.
AMP chief economist, Dr. Shane Oliver described the data as being “weaker than expected”.
He said that “housing credit growth of just 3.1% year on year which is a new record low.”
“The big surprise was that investor credit continues to contract and is now down on a year ago. That said a pick up in housing finance commitments in recent months still suggests that it should pick up in the months ahead.
“Meanwhile other personal credit continues to fall and growth in business credit weakened further to 3.3% year on year.”