The domestic economy

• As the economy continues to respond to tight monetary conditions, progress is now being made on reducing retail price inflation, although labour cost pressures remain uncomfortably strong.
• Other indicators of actual or potential inflationary pressure are also adjusting; labour demand is continuing to weaken, monetary growth is slowing and the current balance, which had been improving rapidly in the early part of last year, may still be doing so, if now much more slowly.
• The fall in output and demand in the second half of 1990 is likely to continue into 1991, but follows a period of rapid growth in the previous five years.
• Recovery is expected to be led by consumption, but its strength and timing will depend on how quickly confidence is restored in the face of weaker financial positions in both the personal and corporate sectors than in earlier recessions.

The domestic economy