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South Africa Risk Climate: Second Quarter Decline in TransUnion Consumer Credit Index Indicates Rising Retail Sector Risk

Impaired Accounts Continuing to Rise Sharply; Consumer Credit Health Deteriorating

South Africa: The TransUnion Consumer Credit Index (CCI) declined to 43.6 in the second quarter of 2013 from 43.8 in the first quarter of the year.

According to TransUnion, the fall in the CCI reflects escalating consumer loan impairments and sustained growth in distressed borrowing, both indicators of rising household financial stress. The CCI has fallen sharply in the first two quarters of 2013, averaging 43.7, close to the average of 42.3 during the four quarters from Q4 2007 to Q3 2008, a period of significant deterioration in consumer credit due to over-indebtedness and the global financial crisis.

The CCI is a unique indicator of consumer credit health based on a 100-point scale. An index above 50.0 indicates improving credit health, below 50.0 represents deterioration. Credit health refers to the ability of consumers to service existing credit obligations within the constraints of monthly household budgets.

TransUnion Africa President, Geoff Miller, said that consumer credit health is declining and that consumer markets are becoming more vulnerable. “Consumer credit health has now been deteriorating for four straight quarters and the risk of deterioration in the credit cycle has risen materially. Credit-sensitive retail sectors need to become increasingly vigilant to the risks this trend poses to their business.”

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