The international environment

• This article reports on developments in the major overseas economies since the August 1996 Quarterly Bulletin. However, since UK exports to the G7 account for slightly less than 50% of UK exports, it is also important to consider developments beyond those economies.
• In Germany, the pause in growth, which started in the middle of 1995, now appears to be over. There is less sign of a revival in activity in France and Italy. Output and employment have continued to grow rapidly in the United States. The recovery in the Japanese economy that started around the end of last year has continued, albeit at a moderate pace.
• Inflation in the major overseas economies has been low in recent years. There are some signs of a slight pick-up in the United States, but the evidence is mixed. Inflation has fallen further in most European countries and remains negligible in Japan. Producer price inflation is very low in almost all the industrialised countries.
• Interest rates were trimmed in Germany and other European countries in September, continuing the recent shift in policy mix towards tighter fiscal and looser monetary policy. Official interest rates were left unchanged in the United States and Japan.
• Growth in Asia has moderated during 1996, but this has been broadly offset by strengthening activity in Mexico and Africa.

The international environment