The domestic economy

• Underlying inflation fell rapidly through the summer as the fragility of consumer spending encouraged heavy price discounting by many retailers.
• Total domestic demand has been rising slowly since the middle of last year but, with the net trade position deteriorating, output has shown little sign of picking up.
• Business and consumer confidence have fallen sharply since the spring and many companies now appear to be renewing their efforts to control costs through further cuts in their workforce.
• The faster growth of unemployment in recent months is adding to the financial worries of households. Scheduled debt repayments have continued to rise and individuals remain unwilling to make new borrowing commitments.
• Turnover in the housing market appears to have fallen back sharply following the ending of the stamp duty holiday, and the decline in prices has intensified.
• Against this depressed background, the easing of monetary policy following sterling's withdrawal from the exchange rate mechanism will assist the return to economic growth.
• Sterling's depreciation offers a sizable opportunity to U K exporters but it also reduces the downward pressure on inflation.

The domestic economy