The domestic economy

Quarterly Bulletin 1991 Q3
Published on 01 September 1991
  • The rate of decline in activity recorded in recent statistics is moderating. These statistics, which necessarily lag to some extent the current position, show no tangible evidence yet of recovery.
  • Weakness in consumption has been associated with a sharp reduction in the rate of personal borrowing; with little prospect of a rise in real income, in the short term its revival would seem to depend on consumers' willingness to resume borrowing (of which as yet there is no sign), and that on a fuller restoration of confidence.
  • Because of the lags in the operation of monetary policy, the effects of interest rate reductions already made have yet to be fully felt.
  • Output may not respond immediately and fully to any pick-up in demand because stocks still appear to be above desired levels.
  • Nevertheless, with the current external balance improving sharply and the public sector moving into (cyclical) deficit, private sector saving is rising; with personal savings stabilising (or falling) the indications are that this is now at last feeding through to a reduction in the corporate sector deficit.
  • There has been a further significant improvement in inflation, with the twelve-month growth in the RPI continuing to fall, clear progress in reducing producers' output price inflation, reductions in the rate of growth of settlements and earnings, and a narrowing of the differential between UK inflation and that in our major trading partners.

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