In itsAnnual Economic Reportfor 1986, released in August of that year, the South African Reserve Bank noted that a variety of conditions had by then been created that eventually should prove conducive to a more vigorous upturn in aggregate private expenditure. Among the several conditions listed by the Bank were the relaxed stance of monetary policy, the Government's somewhat easier approach to its own spending policies, and the relatively low exchange value of the rand. The Bank'sAnnual Economic Reportfor 1987, in a somewhat similar vein, noted that conditions still existed in August 1987 that were "friendly" to a renewed and more vigorous acceleration in consumer expenditure and to the eventual translation of such expenditure into fixed investment spending. TheReportheld that prospects for the quarters ahead were for continued real growth at "modest to moderate" rates.In the event, real gross domestic product in the South African economy advanced at a rate of very nearly 3 per cent from the third quarter of 1986 to the second quarter of 1987, and at a marginally lower rate from the third quarter of 1987 to the second quarter of 1988. Moreover, significantly faster rates of increase were recorded in real grossnationalproduct.A marked slackening of the tempo of real output increases in the middle quarters of 1987 was followed by relatively brisk expansion in the fourth quarter of 1987 and the first quarter of 1988. A renewed slowdown in the second quarter of 1988, although not unlike second-quarter slow-downs in 1987 and other recent years, may now signify the levelling-out of the current upswing. Current prospects are for a real growth rate in calendar 1988 of the order of2 ½ per cent.Real gross domestic expenditure, after prolonged vacillation in the second half of 1985 and all of 1986, assumed a decidedly upward course from the first quarter of 1987 which was sustained into the first quarter of 1988. As in the case of domestic production, a marked levelling-off was observed in the second quarter of 1988.Real private consumption expenditure rose uninterruptedly and steadily, at average rates significantly in excess of the rates of increase in households' real disposable incomes, during most of the past two calendar years, and continued to do so throughthefirst two quarters of 1988. The growth rate of real government consumption expenditure, although considerably more volatile, broadly matched the growth rate of real private consumption expenditure over the past two years. In accordance withofficial intentions, signs of reduction of the relative importance of government consumption expenditure in the domestic economy were beginning to become apparent from the third quarter of 1987.Total real gross domestic fixed investment showed a modest revival in the four quarters to mid-1988 but in the case of manufacturing industry it did not reach the level of depreciation allowances. The result was some further shrinkage of the physical capital stock in manufacturing industry. In similar fashion, the significantinventoryaccumulation of the past five quarters to mid-1988 was still too modest to raise most inventories-to-output and inventories-to-sales ratios. The restocking process of the past few quarters did, however, add significantly to domestic demand and imports in the first half of 1988. Since both imports and inventory accumulation were encouraged by fears of further depreciation of the rand, increases in import duties or a re-imposition of quantitative import controls, the imported component of the more recent inventory accretions is likely to have been unusually large.The combination of domestic expenditure and production trends.of the past several quarters caused the South African economy to move into the "advanced" stages of a fairly typical, if only moderately vigorous, upswing. Symptoms of this approaching maturity were apparent in balance of payments as well as monetary and credit developments. Import volumes rose markedly, although by no means inordinately sharply in their cyclical context, from the lower turning p