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Private sector credit balloons by $17.2 million

Private sector credit grew $17.2 million in June, continuing a reversal in direction as businesses increased their commercial loans and consumers consolidated their loan positions.

Released in the Central Bank of The Bahamas’ June 2011 Monthly Economic & Financial Developments (MEFD) report, the private sector credit growth comes during a “still uneven and fragile” global economic recovery.   Consumers may be showing some wariness for the economy’s prospects, with a $500,000 million increase in their lending accounted for by loan consolidation, according to the latest data available.

Bahamas Chamber of Commerce and Employers Confederation chairman Winston Rolle told Guardian Business that debt consolidation may be in order for consumers, but is not as helpful to the business community.

“Debt consolidation means that people are trying to get a better handle on their finances,” Rolle said.  “From a business perspective, we would have like to see that go to business development, but you must get your personal finances together before you embark on other areas.”

There may be a lot of fear playing in the psyche of the consumer, according to Rolle, and it may be manifesting through more cautious consumer positions.

“It looks like there is still going to be turbulent economic times ahead, with further uncertainty form the downgrading of US debt to AA+. It will be more of a case of fear about what could possibly happen,” Rolle said.

“Plus it’s not just the US but what’s happening there is beginning to cascade in all international markets as well.”

Both the months of April and May showed a move by consumers to consolidate loans – with $13.9 million and $10.0 million growth for the respective periods.  May saw a net $5.2 million rebound in consumer credit – despite the $10.0 million consolidation growth that month.  The growth in consumer credit also contracted, this year June’s increase falling by $2.7 million year-on-year.

Consumer lending for travel grew $0.4 million with a $0.3 million expansion in loans for land purchases.  Meanwhile, net repayments for home improvements and education contracted $1.9 million and $0.5 million, respectively.

Loans to businesses showed $12.7 million in growth for June, following last year June’s commercial loans contraction of $31.3 million.  Commercial loans account for 11.7 percent of total credit.

The mortgage sector saw a $4 million growth for June – but the growth in that sector was $7.7 million less than seen in June 2010.

“The mortgage sector has a direct impact on the construction industry, so it shows the lack of opportunity taking place in that sector,” Rolle said.

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