the united states is a bit more positive, with the worst of the fiscal cliff scenarios having been averted. the nascent recovery in the us housing market, the pick - up in private sector investment, and the recovery in the banking system point to a more favourable outcome than was feared in the latter part of last year. but some of the fiscal issues have merely been delayed and not fully resolved, so the potential for a further negative shock to growth remains. the so - called “ sequester ” came into effect a few weeks ago, and the negative impact of this will become apparent in due course. the most recent data coming out of the us suggest a moderation in the second quarter following weak retail sales in march, slower employment growth and the fall in the michigan consumer confidence index to a nine - month low in april, as the effects of higher taxes begin to take effect. even in the event of a relatively positive growth scenario, us monetary policy is likely to remain highly accommodative for some time to come, with implications for the persistence of capital flows to emerging markets. the recently published minutes of the fomc suggest that there has been consideration given to moderating the pace of quantitative easing, and there are fears that this could result in significant reversals of capital flows from emerging economies. however, we believe that for this reversal to occur will require a sustained improvement in the unemployment situation. any exit strategy is likely to be measured, to ensure that it does not undermine any nascent recovery. the eventual normalisation of us monetary policy is likely to signal a return to sustained growth, which will contribute positively to the global recovery. furthermore, an early reversal of quantitative easing may also be offset by quantitative easing in japan. fears of a hard landing in china have abated, and although a return to previous elevated growth rates is unlikely, the expected growth rates of around 8 per cent should help to underpin the demand for and the price of commodities, which is critical for south africa ’ s growth outlook. there is little doubt that there has been a tectonic shift in the drivers of global growth. the emergence of countries such as brazil, russia, china and india, for example, has changed the epicentre of global economic activity. the brics share of global gdp has increased threefold in the past 15 years, and this share is currently around 20 per cent in market terms and about 30 per cent in ppp terms. according to arvind sub

zinc, and for 30 per cent of world consumption growth in oil. due to its rapid growth and rising share in the world economy, china is expected to retain its critical role in driving commodity price movements. the recent increase in food prices has been the result of a number of factors including a weaker us dollar, the impact of higher energy and fertiliser prices, crop - specific supply shortfalls and droughts, and low inventory levels. some analysts suggest that higher global real incomes have also contributed to the upward pressure on food prices. an increasingly important driver of agricultural prices comes from the strong demand for bio - fuels, which has seen the diversion of agricultural output to energy production. although a number of countries have made significant strides in bio - fuels production, the united states and brazil together account for more than 70 per cent of worldwide production of ethanol. 5. the commodity price boom and the markets in recent years, investor interest in commodities has increased in line with the rise in commodity prices and increased global liquidity. trade in commodity indices, which total approximately us $ 100 billion has increased by a factor of 20 in the past decade. this is still relatively small compared to other asset classes but there has been a proliferation and diversification of the investor base including hedge funds and asset managers who have seen commodities as a means to diversify portfolio risk and take advantage of the high yields that have been achieved. significantly, investors are increasingly viewing commodities as a long - term investment. the financialisation of commodities has also been boosted by developments in financial engineering, with strong growth underlying contracts and investment strategies. expectations of continued and sustained growth in asia, particularly in india and china, have served to fuel the increased demand for commodity asset classes. a deeper and diversified market can bring benefits in terms of market efficiency. for example the fact that it is easier to hedge future production reduces the risk of new productive investment which may otherwise take some time to come on stream. a related issue concerns the role of speculators who are regarded by some as being responsible for price volatility in the market. recent evidence, however, suggests that this may not necessarily be the case. a recent study conducted by the chicago futures trading commission showed that speculative traders were not leading but rather responding to market developments. this suggests that speculators have tended rather to stabilise the market. developments in the financialisation of commodity markets may, however, raise several financial stability questions for central banks and financial sector regulators. in particular,