Despite the surge in profits at our major retailers, private credit dropped 0.1% in May, despite another solid month for housing lending, according to figures from the Reserve Bank today.

The fall came after a o.1% rise in April and continues the slowing trend in credit creation this year, especially in business lending.

The RBA figures show that private credit grew just 3.9% in the year to May, down sharply from the 4.6% rate in the year to April.

As in April, housing credit was strong: up 0.5% after April’s rise of 0.6%. Over the year the growth rate was a solid 7%, slightly lower than the 7.1% in the year to April.

The Reserve Bank said “The rise in housing credit over May was mostly due to growth in lending to owner-occupiers, with only weak growth in lending to investors.”

Other personal credit continued weak, falling 0.6% in May from April, the same as the slide in April from March. Over the year to May other credit fell a crunching 7.8%.

Business lending remains weak: down 0.7% in May after a fall of 0.5% in April. That left it up just 2.1% over the year to May, after a 3.5% rise in the year to April.

The Reserve Bank said: “Since its peak in November 2008, the decline in business credit has been due to falls in foreign currency denominated lending.

“These falls reflect both the appreciation of the Australian dollar over this period and some reduction in the stock of foreign currency denominated lending.”