General assessment

Growth seems now to be re-emerging among the industrial countries and the omens for its continuation are fairly good, although significant risks remain despite the further international action taken to reduce them. The environment is also improving for many developing countries, although some, particularly oil exporters, are obliged to undertake painful adjustments in the face of lower oil and other commodity prices. Output has picked up in the United Kingdom too, in response mainly to a strong increase in personal consumption induced by rising real incomes. The supply response, however, has not so far been sufficient to avert a surge in imports, leading, despite better non-oil export performance and rising invisible earnings, to a marked deterioration in the current account. Prospects for the economy next year are nevertheless encouraging, provided there can be better containment of costs and a fuller supply response by industry, signs of which have recently begun to emerge. This Assessment considers these developments and their implications for monetary policy, the conduct of which continues to be complicated by extensive technological and structural change in the financial system, among which the reforms in securities trading which took effect in October are a notable recent example.

General assessment