Due to higher tariffs and less activity, households use paper and consumer credit less

Bank credit is an indicator of the trend of economic activity. In August, after the financial crisis and the change of ministers for the Economy, lthe lines that finance consumption fell again.

Analysts believe there is a combination of factors behind this credit contraction: the high levels of inflation, which erodes the purchasing power of households, the consequent rise in interest rates and a slowdown in activity appear to be the most significant.

Last month, the lines used by households to self-finance returned to believe in rising inflation. personal loans fell in real terms they fell by 1.7% while the consumption with credit cards made it by 1.6%.

Although the decline in the former is less than in July, it shows that there is a trend which can hardly be overturned in this context.

“Although the loans are catching up their rate of growth in face values, they have been below inflation in recent months. back in January this year to find growth above the inflation index for the month, “said Guillermo Barbero, of First Capital Group.

The BCRA rate hike, which last month brought Leliq’s effective yield to 85% per annum, has a contractual effect on the activity. On the one hand, it affects the supply of credit, as banks prefer to place their pesos in central bank debt before “taking the risk” and lending to their customers.

And, on the other hand, it negatively affects credit demand. “Given the increase in interest, the borrowing capacity of individuals decreases, in short: the greater the interest to be paid, the lower the principal of the loan to be granted¨, added Barber.

So far this year all credit lines, those aimed at individuals and even those that finance companies, have contracted with respect to the increase in inflation. Since December 2021, loans in pesos have been reduced by 8.5% relative to the increase in prices and economists warn that there are no short-term reasons for them to bounce.

“A scenario of declining activity, like the one we expect for the second half of the year, will have a direct correlation on credit dynamics, added this to the new interest rate hike scenario which will eventually depress the demand side. We expect a retraction of the title e increased delinquencypointed out the economists of the consulting firm LCG.

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