. this poses a risk to the growth outlook for the rest of the year. gross fixed capital formation turned positive in the first quarter of 2010, but only marginally so ( 0, 2 per cent ), driven mainly by public corporations. of concern is the continued contraction of private sector investment. household consumption expenditure appears to have improved and turned ( weakly ) positive ( 1, 6 per cent ) in the final quarter of 2009, after five consecutive quarters of negative growth. in the first quarter it measured 5, 7 per cent quarter - on - quarter annualised, though some moderation may be expected. this is also reflected in the credit extension numbers, which although remaining low, recently turned positive. the inflation outlook remains favourable : in may it measured 4, 6 per cent, and we expect inflation to remain within the target range for the remainder of the forecast period, but our forecasts are that it will begin to rise moderately by the fourth quarter of 2010. this outlook has enabled us to reduce the repo rate to its lowest level in nominal terms at 6, 5 % since the late 1970s. unfortunately, despite positive growth, employment continues to lag. this is not unusual in the early phases of the cycle, but there are other factors that seem to indicate that the pickup in employment is likely to be slow. we lost a disproportionately large number of jobs during the crisis compared with other countries, but despite this, wage settlements remain well above inflation, particularly in the public sector. if this is not matched by improved productivity there are likely to be inflationary consequences. the public protests seen abroad in greece and elsewhere do not reflect the same demands ie for higher wages. in europe the protests are against losing jobs, and the severe austerity measures that have been introduced to reduce double - digit sovereign debt. south africa cannot, on the one hand, put employment creation as its priority, and then at the same time demand ( and agree to ) wage and salary increases that are, in some instances, double the level of inflation. in this regard the behaviour of management is critically important. outrageous increases or bonuses are simply not acceptable. management has to lead by example. according to computus, a forensic accounting firm, executive pay has increased notwithstanding the financial crisis and global recession. in its sample of 326 listed companies and parastatals, it reports that ceo remuneration increased by 11, 5 % on average from 2006 to 2009. south africa as a

as people are being asked to pay the price of the adjustment in terms of either lower wages, or in terms of their jobs. this is occurring at a time when elections are resulting in an increasing number of weak coalition governments, reflecting a lack of social consensus on the way forward. the obvious solution, namely to grow out of the crisis, is not that easy as growth is likely to remain lower for longer. strategies for dealing with unemployment, particularly in europe, are creating further problems. for example, the extension of the working life of individuals in a number of countries, while helping with the demographic problems of dealing with an ageing population, is leading to more youth unemployment. in spain the unemployment rate is 20 per cent, but youth unemployment is closer to 40 per cent. there is a real danger of young people remaining unemployed for some time to come, resulting in deeper structural and social problems. europe remains the biggest area of concern : the weaknesses of the fixed exchange rate system have been exposed. it is not enough to have currency union, as there has to be a credible fiscal union as well, with enforceable limits. while there was growth, the decline in competitiveness in the peripheral european countries could be papered over, and the burgeoning fiscal and current account deficits could be financed, provided that the sovereign debt of these countries was seen to be of the same risk category as the core countries. but that has changed in a dramatic way, although it was surprising that it took the downgrades by the rating agencies to get the markets to react to something that had been evident for some time. the fiscal adjustment in europe and the uk means that growth is going to be very low for some time, perhaps not even in positive territory. however, some countries may have stronger growth, eg germany, if they do not require much fiscal adjustment, and are able to increase productivity and take advantage of the weaker euro. in the us, consumption expenditure is not recovering at the pace initially expected, as high levels of unemployment, a de - leveraging banking sector and a weak housing market remain a constraint on households still faced with excessive debt. china and the asian region in general, as well as some countries in south america, are seen as the main growth poles. however, there are signs that the policy - induced slowdown in china is having some effect. the latest forecasts are for growth of “ only ” 9 per cent. while a policy to cool down the chinese economy was