Banks pump extra NZ$545 mln of loans into farms in June

New Zealand banks lent an extra NZ$545 million to the agriculture sector in June, figures from the Reserve Bank of New Zealand show. However, year-on-year credit growth for agriculture slowed further to 14.5% from 17% in May and the previous 12 months which all saw yearly growth of above 20%. Business credit lending saw its sixth monthly contraction in June, down NZ$361 million from May. Year-on-year growth slowed to 3.4% from 5.2% in May. "Business credit lending has weakened considerably over the past few months, now only up 3.4% on year-ago levels, down from a pace of annual growth of 10% earlier this year, ASB economist Jane Turner said. "The slowdown in growth reflects the weak economic environment; with investment plans significantly scaled back reducing the need for finance," Turner said. Housing lending grew by NZ$192 million, or 0.1% in June from May, and year-on-year growth slowed again to 2.8% from 2.9% in May. "Household lending increased only 0.1% seasonally adjusted over June, weaker than we had expected given the resilience in house sales over May and June, Turner said. "However, May figures may have been boosted by frenzied sales activity over April and after averaging May and June together lending remains consistent with a modest pick up in housing lending growth. The housing turnover, although up off its late 2008 lows, still remains below average. We expect the housing market to hold onto its gains, although the recovery is likely to be a muted one and lending growth is likely to remain modest. Stabilisation in house prices should help reduce the drag on housing credit lending," she said. Consumer lending also fell for the sixth consecutive month and saw a year-on-year contraction of 3%. Lending contracted by NZ$104 million from May. "Households have possibly become more cautious about taking on debt when the economic and employment outlook remains challenging," Turner said. See all our sector credit charts here.