This Quarterly Bulletin focuses on economic developments in the first quarter of 2011. With the Bank being the institution responsible for identifying turning points in the business cycle, it also contains an article identifying the most recent lower turning point. Furthermore it includes a note presenting South Africa’s national financial account for 2010, including the flows on a quarterly basis. To start with the international scene: Despite being uneven, with emerging-market economies outpacing the developed economies, the global economic recovery continued in the first quarter of 2011, defying concerns of a possible double-dip outcome in activity. In most developed economies stimulatory monetary policies remained in place, combined with fiscal consolidation alongside fragile confidence and a lack of job creation. Political turmoil and conflict in a number of countries in the Middle East and North Africa continued to disrupt economic activity, contributing to upward pressure on international crude oil prices. Following the occurrence of a massive earthquake and tsunami that devastated a large area of Japan on 11 March 2011, global supply chains were disrupted by the discontinuation of production in those areas. Global inflation accelerated as a result of continued high international commodity prices due to strong demand from emerging-market economies. A rise in inflation prompted several emerging-market countries to tighten their monetary policies. The European Central Bank was the first of the mature economies’ monetary authorities to increase policy interest rates, albeit to a level that was still very low. Moving on to the domestic economy: The upward phase in the South African business cycle continued in the first quarter of 2011, with real gross domestic product increasing at an annualised rate of almost 5 per cent. Most prominent output gains were recorded in the manufacturing sector, with the expansion occurring in most subsectors. Aggregate production in the manufacturing sector, however, remained below its level prior to the financial crisis and capacity utilisation rose only slightly in the first quarter.  Growth in the tertiary sector accelerated somewhat in the first quarter of 2011, not least on account of rising sales volumes in the commerce sector. A loss in momentum, however, occurred in the primary sector during this period following lower field crop production as a result of flooding which suppressed agricultural production. A slower pace of increase in mining activity due to lower production volumes of gold and coal contributed to the slowing of output by the primary sector.        Final demand in the first quarter of 2011 was boosted by a continued strong rise in real consumption expenditure by households, facilitated by further increases in real disposable income as income from property and compensation of employees trended higher. Expenditure on durable goods recorded the strongest increase over the period. Despite the moderate rise in household debt in the first quarter, the household indebtedness ratio declined as a result of the sturdy increase in disposable income. Mainly as a result of the purchase of a number of military aircraft, final consumption expenditure by government picked up noticeably in the first quarter. When these purchases are excluded, expenditure increases by government occurred along a fairly smooth path.    The rate of increase in real fixed capital formation picked up somewhat in the first quarter, following stronger increases in outlays by both public corporations and the private sector. Real capital outlays by public corporations involved in the electricity and transport sectors, and by private-sector producers of agricultural and mining products as well as transport and communication services increased. Notwithstanding these increases, the overall level of capital formation remained low, in line with the existence of surplus capacity in most sectors.  Rising volumes of sales and production in the economy was supported by inventory accumulation since the final quarter