- Growth in the United States and Japan was strong in the first quarter, but latest data suggest that activity in both countries slowed in the second quarter.
- By contrast, activity in Germany and France strengthened from the moderate growth seen in the first quarter. Activity in Italy is more subdued, though there are signs of a gradual recovery. The smaller EU countries continue to grow strongly.
- Real broad money growth in the major six overseas (M6) economies rose further in the second quarter and is consistent with increasing activity. Rising equity markets should also help to strengthen demand, particularly in the United States, where consumer confidence is already strong.
- Producer prices remain subdued in all the M6 economies; consumer price inflation is currently very low, with little evidence of emerging wage pressures, even in the United States.
- In the absence of price pressures, M6 short-term interest rates were broadly stable in the second quarter. Financial markets do not expect significant rises in short-term interest rates during the remainder of the year.
- Long-term interest rates fell in Japan and the European Union (despite uncertainties about EMU) and were stable in the United States.
Published on
01 September 1997
The international environment