SA Consumer Credit Index | Q4 2018 - TransUnion
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SA Consumer Credit Index | Q4 2018
Index: 50.0 = breakeven
Executive Summary
Credit index 45 50 55
declines sharply Q4 2018 Q3 2018 Q4 2017
to 45 in Q4
• The TransUnion SA Consumer Credit Index (CCI) fell • Accounts in early default (3 months in arrears)
sharply from 50* to 45 in Q4 2018. The index measures increased by 10% y/y in Q4. There continues to be a
consumer credit health where 50.0 is the break-even lack of evidence of worsening. Distressed borrowing
level between improvement and deterioration. (revolving credit utilisation), with revolving credit
utilisation falling 1.3% y/y in Q3. Overall TransUnion
• The index declined by the most in a single quarter since
consumer credit behaviour data nonetheless shows
Q3 2011 when the CCI dropped due to sharp rand
rising consumer stress.
weakness and rising household indebtedness during the
unsecured loan cycle. The key driver of the decline is • Household cash flow was again unchanged y/y in Q4,
rising loan defaults. The proportion of total consumer showing lingering difficulty in household real earnings
accounts 3 months in arrears has been rising steadily growth potential (based on Stats SA & SARB data).
since Q4 2017 and in Q4 2018 was around 13% higher • Household debt service costs (South African Reserve
than the 2017 lows. This trend has not been matched Bank data) increased slightly during the quarter.
by a rise in distressed borrowing signals, however poor The Reserve Bank hiked the repo rate by 25bp during
employment conditions, high fuel prices in Q4, weak Q4 2018.
income growth, and higher interest rates all appear to
have taken their toll on consumer credit health.
*Revised from 51. Data is subject to revision due to subsequent underlying data/estimation finalisation. Changes are typically not material.
**Bureau of Economic Research, Stats SA and SACCI data.
Q4 2018 CCI: Key Facts and Figures No. of consumer accounts measured: 54 million
TransUnion SA Consumer Credit Index No. of accounts three months in arrears: 920,000
70 Value of revolving credit measured: R155 billion
Improving Credit Health
65
Estimated Q4 2018 non-discretionary consumer
60 price inflation (NDCPI): +5.6% y/y (Q3: +5.8% y/y)
55
Estimated Q4 2018 NDCPI-adjusted household
50 disposable income growth: -0.2% y/y (Q3: +0.2% y/y)
45
Estimated aggregate, annual household disposable
40
income: R2.3 trillion (Q3: R2.2tr)
35
Deteriorating Credit Health Estimated national household bank debt as a
30
07 08 09 10 11 12 13 14 15 16 17 18 percentage of disposable income: 71.3%
TransUnion, ETM, Macrobond Prime overdraft rate at end Q4 2018: 10.25%
DATA WEIGHTING IN THE TRANSUNION CCI
TransUnion Defaults Household Debt Servicing
& Distressed Borrowing Cashflow Costs
50% 35% 15%
Unpacking the 4th Quarter 2018 SA Consumer Credit Index
Household credit behaviour
1. Credit defaults 2. Distressed borrowing
TransUnion data shows that consumer repayment Revolving credit (credit cards and store cards) used
worsened throughout 2018. The number of accounts as a percentage of one’s credit limit is a distressed
in early default (3 months in arrears) rose from around borrowing indicator. According to TransUnion revolving
827,000 in Q4 2017 to 920,000 in Q4 2018. The previous credit data, distressed borrowing remained effectively
report from Q3 2018 said that "given generally weak unchanged in Q4 2018, and still remains below 2015/16
employment and business conditions, the trend in highs. Aggregate revolving credit utilisation is still just
household defaults remains a risk to the overall index." below 50% of aggregate credit limits. This means that the
This manifested in Q4, with the proportional number of average household with a credit or store card currently
3 month arrear accounts rising by nearly 10% y/y. Poor uses roughly half of the credit made available to them by
employment conditions, high fuel prices in Q4, weak their card provider. This does not mean that revolving
income growth, and higher interest rates all appear to credit is not growing. Rather, credit and store card debt
have taken their toll on consumer credit health. Lower as measured by TransUnion increased by just under 6%
fuel prices in Q1 2019 will help household budgets, but y/y in Q4. However, card providers increased aggregate
the rise in defaults in Q4 nonetheless implies increasingly credit limits by 7.4% y/y, possibly to accommodate
difficult financial conditions for households. goods inflation and help cushion the impact of fuel
prices on households. This may indicate more credit
distress than implied by the headline utilisation data
and may be a future risk to the overall CCI.
2 | © 2019 TransUnion LLC All Rights Reserved | 19-354369Household cash flow Further Insight: Retail Risks?
Household cash flow did not grow on a y/y basis in The rise in default rates throughout 2018, including in Q4,
Q4 2018, continuing a fairly well-worn trend since 2015. played a significant role in pulling down the overall CCI
The prolonged lack of inflation-adjusted disposable and indicate an increasingly stressed consumer. Income
income and money supply growth indicates a stagnation growth remained weak in Q4 while the costs of living have
in the broader economy and a chronic lack of productivity been increasing steadily, according to the household
growth. This lack of productivity growth is a fundamental cashflow indicator. The petrol price in particular rose
constraint to the extension of household credit since rapidly throughout 2018, peaking in November. JSE-
credit is repaid from wage and salary earnings and those listed retailers have been reporting challenging operating
earnings are a direct function of productivity. Taken conditions in Q1 2019.
together, employment conditions were poor again in Q4**.
In the chart below (bottom right), the TransUnion SA CCI
However, some relative stability in the rand exchange rate
is compared to year-on-year retail & wholesale sales
and a significant decline in oil prices could offer some
growth, with a 15-month lag. The relationship suggests
relief to household budgets in Q1 2019.
slower growth in retail & wholesale sales volumes over
the coming 18 months and possibly even contracting
Household debt serviceability volumes in 2019/20. While this is only one indicator of
Household debt service costs increased marginally in Q4 retail and wholesale sales and shouldn't be regarded as a
as the Reserve Bank (SARB) increased the repo rate from wholly reliable indication of future trends, it nonetheless
6.50% to 6.75% in Q4, back to levels of Q1 2018. In January corroborates reports by retail firms of tough trading
2019, the SARB lowered its inflation forecasts and indicated conditions, lackluster retail leading indicators like car
a monetary policy stance less prone to hiking rates. sales*, and poor hiring conditions**.
According to Stats SA, CPI inflation also fell from 5.2%
to 4.5% y/y in December, adding to expectations that the
SARB faces little pressure to hike rates further in H1 2019.
TransUnion: Accounts in Default ETM: Household Debt Service Cost
3m Arrear Acc/Total Accounts, y/y %chg Debt service cost: disposable income ratio, y/y %chg
15% 40%
Rising Defaults Distress
10% 30%
5%
20%
0%
10%
-5%
0%
-10%
-10%
-15%
Falling Defaults Comfort
-20% -20%
-25% -30%
07 08 09 10 11 12 13 14 15 16 17 18 07 08 09 10 11 12 13 14 15 16 17 18
TransUnion, ETM, Macrobond TransUnion, ETM, Macrobond
ETM: Household Cash Flow TransUnion CCI vs. SA Retail Sales
NDCPI-adj. money supply & disposable income, avg y/y %chg CCI (Index); Retail & Wholesale Sales (real y/y %chg)
15% 65 10%
Strong Cash Flow Advanced
10% 15 m 5%
55
5% 0%
45
0% -5%
Weak Cash Flow
Recession
-5% 35 -10%
06 07 08 09 10 11 12 13 14 15 16 17 18 07 08 09 10 11 12 13 14 15 16 17 18 19
TransUnion, ETM, Macrobond TransUnion, ETM, Macrobond Retail & Wholesale, rhs CCI, lhs
3 | © 2019 TransUnion LLC All Rights Reserved | 19-354369 * NAAMSA data **SACCI, Stats SA QLFS, BER surveysThe TransUnion SA Consumer Credit Index: Key Information
What is the Consumer Credit Index? The data
The TransUnion SA Consumer Credit index is an The Index has three main data components:
indicator of consumer credit health compiled by
• TransUnion Credit Bureau data*
TransUnion, a global leader in risk and information
solutions with technical support from ETM Macro • Official public domain statistics
Advisors, and released quarterly. • Proprietary analytics of public domain statistics
It measures the aggregate consumer loan repayment TRANSUNION CREDIT BUREAU
record, tracks the use of revolving consumer credit Consumer credit card utilisation**; number of consumer
facilities as an indicator of distressed borrowing, credit accounts in arrears (TransUnion).
estimates household cash flow as a means of determining
financial pressure/relief, and quantifies the relative cost OFFICIAL PUBLIC DOMAIN STATISTICS
of servicing outstanding debt. Prime interest rate; household debt to disposable income
ratio (SARB).
The indicator combines actual consumer borrowing and
repayment behaviour with key macroeconomic variables PROPRIETARY ANALYTICS OF PUBLIC DOMAIN STATISTICS
impacting on household finances. Non-discretionary CPI derived from the official
Consumer Price Index, ‘Alternative Money Supply’
A ‘diffusion’ index derived from official money supply and credit data
(ETM Analytics; SARB, Stats SA).
The index is designed to fluctuate within the set logical
minimum and maximum of zero to 100, with 50.0 as
the so-called ‘breakeven’ point. Levels above 50.0 are
Data weighting in the TransUnion CCI
associated with higher rates of loan repayment, lower
credit card utilisation, improving household cash flow,
lower interest rates, and credit deleveraging, and vice TransUnion Data 50%
versa for levels below 50.0.
• 50-60/40-50: moderate improvement/deterioration.
• 60-70/30-40: strong improvement/deterioration.
Proprietary Analytics 35%
• 70-90/10-30: extreme/unusual improvement/
deterioration.
• 90-100/0-10: highly improbable improvement/
Official Public Data 15%
deterioration.
4 | © 2019 TransUnion LLC All Rights Reserved | 19-354369 * Incorporating SACCRA data **As supplied by SACCRA membersReal world application Consumer Credit Report
The index may be considered a credible indicator of Information is a powerful thing. As a credit bureau we
macroeconomic events and growth cycles for sectors provide you with credit data which credit lenders use to
affected by consumer finances and credit behaviour. In evaluate your credit history when you apply for loans and
the following chart, the TransUnion SA CCI is compared credit. Your credit report gives you a view of all your debt
to year-on-year retail & wholesale sales growth, with a and payments in the last 24 months.
15-month lag. The relationship suggests slower growth
To order your credit report: Call the TransUnion
in retail & wholesale sales volumes over the coming
Interactive Call Centre at 0861 482 482 or visit us at
18 months.
www.mytransunion.co.za.
The sub-components of the index provide valuable
Monday–Friday, 07h30–18h00 Saturday, 09h00–13h00
business insights in their own right, which can be used to
evaluate consumer behaviour, financial distress, household
CreditVision
cash flow, and household budget dynamics. Contact
TransUnion to gain access to more granular CCI insights. A TransUnion analysis identified 3 million consumers
who could not gain access to credit based on traditional
scoring models. What would an extra 3 million potential
TransUnion CCI vs. SA Retail Sales customers mean for your business?
CCI (Index); Retail & Wholesale Sales (real y/y %chg)
CreditVision not only allows you to say yes more, but now
65 10% you can say yes more confidently. By using trended and
Advanced
alternative data in how you score a consumer, our analysis
15 m 5% also showed we could improve risk predictability by 56%.
55
Find out how you can safely expand your borrower
0%
universe in a competitive market.
45
-5%
Visit us at transunion.co.za/business.
Recession
35 -10%
07 08 09 10 11 12 13 14 15 16 17 18 19
TransUnion, ETM, Macrobond Retail & Wholesale, rhs CCI, lhs
Contact Us
TransUnion SA Consumer Credit Index queries can be sent to:
Lizette Swart SA_MkrtComms@transunion.com or on: +27 11 214 6000.
You can view the index online at transunion.co.za/lp/CCI.
TransUnion Credit Bureau (TransUnion) obtains information for its analyses from sources, which it considers reliable, but TransUnion does not guarantee the accuracy
or completeness of its analyses or any information contained therein. TransUnion makes no warranties, expressed or implied, as to the results obtained by any person
or entity from use of its information and analyses, and makes no warranties or merchantability or fitness for a particular purpose. In no event shall TransUnion be liable
for indirect or incidental, special or consequential damages, regardless of whether such damages were foreseen or unforeseen. TransUnion shall be indemnified and held
harmless from any actions, claims, proceedings, or liabilities with respect to its information and analysis.
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