P2: MONEY SUPPLY RISES BY 19,33 PERCENT FOR JANUARY.

Standard Bank economist Brenda Landsberg said the figures were contrary to consensus expectations. She said the driving force behind the sharp increase was the rise in net foreign assets during the month, which countered the positive effect on money supply of the decline in net claims on government and net other assets and liabilities. "Money supply growth was also spurred along by an increase in claims on the private sector credit extension (PSCE) but in comparison to net foreign assets, the effect of the rise in PSCE was insignificant," she said. "The sharp increase in net foreign assets resulted from the Reserve Bank's transfer of a foreign liability that had been on its books since August last year to the Treasury." Landsberg said money supply growth has not been above 19 percent since 1998, and that the bank's economists suspected that money supply growth may have peaked and could be expected to show more moderate annual growth rates in the months ahead. "In addition, despite the magnitude of both the monthly and annual increases in money supply in January, the fact that the monthly increase in private sector credit extension was considerably milder relative to December bodes well. "It indicates that the surge in demand for credit for pre-emptive purchases registered in December has abated. This may, in part, have resulted from the interest rate increase mid-month. PSCE growth accelerated to 14,1 percent year-on-year in January compared to December's 12,1 percent rise, due to base effects." She said however, that the month-on-month growth in seasonally adjusted terms slowed from 3,2 percent in December to 0,5 percent in January. "The distortion to money supply in January, together with the benign monthly increase in PSCE should alleviate concerns of demand-driven inflation somewhat. Nonetheless, taken collectively, the recent increases in domestic inflation indicators are supportive of tighter monetary policy." Net foreign assets rose by R25,2-billion in January after registering a R12,3-billion decline in December. Over and above the transfer of the foreign liability to the Treasury, other foreign liabilities -- deposits of non-residents with local banks -- also declined during the month. "This is a sign that money ...