PORTFOLIO AND SELECT COMMITTEES ON FINANCE August 2007 Portfolio August 2007

RECENT INTERNATIONAL ECONOMIC DEVELOPMENTS Portfolio August 2007

Global economic growth remains relatively robust and the outlook continues to be favourable. Portfolio August 2007

The monetary policy stance has generally become conservative… Portfolio August 2007

The monetary policy stance has generally become conservative… Portfolio August 2007

…which has helped to contain inflation expectations. Portfolio August 2007

Inflation trends in the SADC countries remain mixed. Portfolio August 2007

RECENT DOMESTIC ECONOMIC DEVELOPMENTS Portfolio August 2007

The South African economy continued to grow in the first quarter of 2007, though at a slower pace... Portfolio August 2007

...mainly due to a decline in the real value added by the primary sector. Portfolio August 2007

Although still exceeding the rate of growth in gross domestic product, the rate of growth in real gross domestic expenditure slowed considerably in the first quarter of 2007. Portfolio August 2007

Growth in real final consumption expenditure by households moderated... Portfolio August 2007

…alongside a slightly stronger increase in real disposable income of households… Portfolio August 2007

…while household debt as well as household debt service cost as percentage of household disposable income continued their upward momentum. Portfolio August 2007

By contrast, real final consumption expenditure by general government picked up strongly… Portfolio August 2007

…along with a brisk increase in real gross fixed capital formation. Portfolio August 2007

The national saving ratio increased marginally. Portfolio August 2007

Manufacturing conditions remained in firm territory compared with the doldrums of early 2006. Portfolio August 2007

Consumer confidence remains strong. Portfolio August 2007

Business confidence has remained at relatively high levels for an unprecedented nine quarters... Portfolio August 2007

The composite leading business cycle indicator moderated in the second half of 2006, but recently resumed its upward trend... Portfolio August 2007

Consistent and robust growth in the South African economy has spurred on growth in employment. Portfolio August 2007

Nominal remuneration per worker increased significantly in the year to the fourth quarter of 2006 before moderating in the following quarter. Portfolio August 2007

Strong growth in employment undermined growth in productivity in the first quarter of 2007. Portfolio August 2007

Slow growth in average nominal remuneration per worker was reflected in a modest increase in nominal unit labour cost during the first quarter of 2007. Portfolio August 2007

Production price inflation reached a recent high in May 2007 before inching lower in June… Portfolio August 2007

…while CPIX inflation breached the upper limit of the inflation target range for the third consecutive month in June 2007. Portfolio August 2007

The current-account deficit narrowed during the first quarter of 2007. Portfolio August 2007

The financial account of the balance of payments remained in surplus in the first quarter of 2007 following record inflows for the 2006 calendar year. Portfolio August 2007

Gross gold and foreign exchange reserves rose further during the second quarter of 2007. Portfolio August 2007

The exchange rate of the rand recovered during the second quarter of 2007 following a decline in the first quarter of 2007. Portfolio August 2007

Growth in M3 continued at an exceptionally strong pace in the second quarter of 2007, bolstered by positive wealth effects and robust economic activity. Portfolio August 2007

Growth in banks’ total loans and advances maintained a firm pace in the second quarter of 2007 despite securitisation transactions during this period. Portfolio August 2007

Money-market rates continued their upward trend, tracing the change in the repurchase rate during the second quarter of 2007. Portfolio August 2007

From late February 2007, the yield on long-term government bonds increased significantly... Portfolio August 2007

...and the yield curve moved higher. Portfolio August 2007

Inflation expectations rose with the release of worse-than-anticipated inflation data and the high price of oil. Portfolio August 2007

Trading activity in the secondary share market reached new highs... Portfolio August 2007

...as share prices continued to register record levels. Portfolio August 2007

Although decelerating, twelve-month growth in house prices remained strong. Portfolio August 2007

Government finances continued to be supportive of a disciplined monetary policy environment. Portfolio August 2007

Portfolio August 2007