The international environment

• Output continued to rise in the United States in the second quarter; but the recession deepened in continental Europe.
• Inflation pressures are subdued in the major economies largely reflecting weak demand. Weak income growth and high unemployment continue to depress confidence.
• Trade imbalances are again becoming more pronounced, although changes in relative demand and competitiveness may even these out over the longer term.
• Canada, the European Community, Japan and the United States reported to G7 leaders on a package of tariff cuts that could form part of a Uruguay Round agreement.
• Short-term interest rates were cut slightly in Germany and more substantially in some other European countries, though exchange rate tensions recurred in late July.

The international environment