Category Archives: Economic Research

Economic Research

PSCE – May 2015

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Overall

Total credit extended to the private sector increased by N$1.0 billion, or 1.4%, in May 2015, taking total credit outstanding to N$73.0 billion. On an annual basis PSCE growth was in line with the 16.8% growth rate recorded in April. A net total of N$9.9 billion worth of credit has been extended over the last 12 months. Of this N$9.9 billion, approximately N$5.4bn was issued to businesses, while N$4.5bn was taken up by individuals.

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Credit extension to households

Credit extension to households expanded by 1.0% on a monthly basis and 11.9% on an annual basis in May, showing little reaction to the interest rate increase of February 2015. It is worth remembering that the transmission mechanism between rate hikes and PSCE contractions is relatively slow, particularly when interest rate increases are small.

Household mortgage loans expanded by 1.1% month on month and continue to make up the majority of credit extended to households. Mortgage loans to individuals make up almost 40% of total credit extended. Overdrafts expanded by 1.0% on a monthly basis, and other loans and advances increased by 0.7%.

Instalment credit makes up the second largest component of credit extended to households but is the fastest growing component with a year on year growth rate of 17.3% compared to the 11.9% growth seen in total credit extended to households. This points to a nation that is becoming more comfortable with the use of debt for private consumption. Installment credit is often used to purchase consumer goods and could be seen as a non-productive utilization of credit, and much of this is spent on imported goods.

Credit extension to corporates

Credit extension to corporates grew by 1.7% on a month on month basis and 21.4% year-on-year In May, meaningfully higher than the growth of credit extended to households once again. This expansion was, primarily driven by huge growth in mortgage loans, up 24.0% y/y, followed by other claims, 48.3% more than a year ago. The rapid uptake of credit by businesses can, at least partly, be attributed to the rapid expansion of the local economy as well as the potential growth in such yet to be unlocked.

Reserves and money supply

The stock of foreign reserves decreased at the end of May 2015. International reserves stood at N$13.7 billion at the end of May 2015, down from N$15.4 billion at the end of the preceding month. The slowed growth mainly came as a result of increased government expenditure and net capital outflows from commercial banks during May 2015.

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Outlook

Due to strong wealth effects as a result of prolonged and abnormally high growth, we believe that demand for credit will remain high, while real income growth will allow suppliers of debt to continue to lend with a fair level of confidence. Additionally, the lagged effects of increasing interest rates mean that it is unlikely that we will seen a major impact on credit demand by households for a period of 6 to 18 months after rate hikes start, provided that the magnitude of the hiking cycle is sufficient to cause an impact. However, the decline in reserves is cause for concern, as is the peculiar growth in installment credit seen through May, and these factors may result in a sooner, and more aggressive, interest rate hike than previously expected.

 

Building Plans – May 2015

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Building Plans May 2015

A total of 195 building plans to the value of N$365 million were approved by the City of Windhoek in May 2015. On a year to date basis 1,073 plans were approved with a value of N$937.7 million versus 1,104 plans valued at N$1,158 million last May. On a year to date basis the value of plans approved was down 19% although recovering during May. On a month to date basis the value of plans approved rose 232%. The large increase in the value of total plans approved during the month is attributed to the value of additions to existing property growing significantly. The below chart illustrates the elevated value of plans approved in May, with only two months during the last five years exhibiting a higher value of plans approved.

Building Plans May 2015 2While the 12 months cumulative number of plans approved is still well down from peak levels, the 12 month cumulative value of plans approved has rebounded due to the strong values in May. The 12 month cumulative number of plans approved fell to 2,815 from 2,834 in April, while the 12 month cumulative value of plans approved rose from N$1,879 million to N$2,079 million.

Building Plans May 2015 3In our view the construction sector will remain one of the leading growth and development sectors for 2015 in the Namibian economy, with both private sector and government having aggressive development plans. However, many such plans fall out of the Windhoek municipal area, and as such are not captured in the monthly building plan statistics.

 

Vehicle Sales – May 2015

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Veh May

A total of 1,603 new vehicles were sold in Namibia during May. This constitutes the lowest new vehicle sales figure since January 2014. Sales fell 3.3% year on year after growing by 4.4% year on year in April. On a month on month basis sales of new vehicles fell by 8% although year to date sales set a record high with 9,148 new vehicles sold during the first five months of 2015.

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The 12 month cumulative measure decreased to 22,611 from 22,664 in April, the first such decrease in 30 months. The magnitude of the decrease is very slight and does not indicate a material decline in the rate of growth of new vehicle sales.

Sales of passenger vehicles decreased by 15.4% month on month during May after sliding 4.4% month on month in April. On a year to date basis 4,080 new passenger have been sold eclipsing last year’s figure of 3,913. Once again Toyota and Volkswagen made up the bulk of new passenger vehicle sales, contributing 61% to the total, down from 70% in April. The roles have reversed however with Volkswagen outselling Toyota for the first time since June last year.

Total new commercial vehicle sales dropped a further 0.6% month on month in May after falling 29.7% in April. On a year to date basis the trend continues with record new commercial vehicle sales being recorded once again in May despite the comparatively poor figures recorded in April and May. Sales of new light commercial vehicles rose by 1.7% month on month, the only subsector to record an increase on a month on month basis. Sales of new medium commercial vehicles fell 45.9% month on month, with a total of 20 vehicles leaving the showroom floor. 57 new heavy commercial vehicles were sold during May, one less than in April. Sales of medium and heavy commercial vehicles on a month on month basis tend to be inconsistent and thus are not always indicative of the bigger picture. Both these categories have recorded record sales on a year to date basis during 2015 thus far.

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The Bottom Line

Recent relative weakness in new vehicle sales can largely be attributed to the high base set during the first three months of 2015. The cumulative year to date figures convey a truer picture, with all subcategories posting record sales. A strong consumer base supported by expansionary fiscal policy and real wage growth should see the growth trend continue, although at a slower pace due to an elevated base.