The current account deficit narrowed to 2.5% in Q2 of 2010 due to an improvement in the trade account as well as the impact of the Soccer World Cup. The slowdown in GDP growth to 3.2% quarter-on-quarter is due to further de-stocking of inventory as both household consumption expenditure (4.8%) and government consumption expenditure (7.2%) grew strongly over the quarter.

In August CPI slowed to a year-on-year rate of 3.5%. The rand's strength caused the price of vehicles, furnishings, textiles and personal care products to fall in local currency.

In August 2010, private sector credit grew by 3.0% year-on-year while credit given to households grew by 5.6% year-on-year.

In May 2010 CPI slowed to a year-on-year rate of 4.6% from 4.8% the previous month. The overall inflation rate has benefited from low food inflation and the appreciation of the rand against our global trading partners. Infrastructure price increases and wage settlements are the major negatives for the inflation rate over the next year.

In May 2010 private sector credit grew by 0.8% year-on-year after contracting for the past six months. Mortgage advances which has grown by 4.8% year-on-year, is the major contributor to private sector credit growth. The contraction in credit demand extended to the corporate sector has also slowed down during May.

The MPC reduced the repo rate to 6.5% at the March meeting. As the interest rate move was not priced into the money market rates, the NCD yield curve adjusted downwards by 50 basis points over the whole curve. The decision reflects a shift in monetary policy from pure inflation targeting to also consider economic growth and employment as key policy considerations.

The rand's strength against the US dollar, the euro and sterling has contributed to lower inflation expectations for 2010. The rand has followed the strength of other commodity based currencies such as Australia and Canada.

In February 2010 CPI slowed to 5.7% from 6.2% year-on-year. The CPI excluding administrative prices has fallen to 4.5% year-on-year. The rand's strength over the past 12 months has had a significant influence on the downward trend in inflation.

2009 will be remembered by the sharp fall in the repo rate in the 1st half of the year to 7%. The sharp slowdown in real GDP and the decline in CPI back into the target range created the landscape for the lower interest rates. In 2010 we expect the economy to recover from the downswing and that the market may anticipate later in the year that the repo rate will rise in 2011. For November 2009 CPI improved to 5.8% year-on-year due to a fall in food prices and a decline in the price of furniture and appliances. The rand's strength and the weak household demand have created downward pressure on the prices of durable and semi-durable goods.