After the South African economy had been in a cyclical upswing for almost four years, it entered a downward phase of the business cycle in the third quarter of 1981. By the middle of 1982 there were clear signs that the economy was in the process of cooling down. As an aftermath of the preceding boom, however, important strains remained present. In all, the adjustment during the first three quarters of the downswing was fairly mild and did not show the characteristics of a full-scale recession.