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mpc: 2 utility price cuts and the effects of increased competition on retailers' margins - which would tend to reduce RPIX inflation, and it was unclear to what extent these were incorporated into wage bargainers' inflation expectations. 4 Second, the rapid growth in consumption in Q1 and Q2 partly reflected recovery from the slowdown last autumn, when confidence had been hit by the shocks to the world economy and international financial markets. Third, consumer spending growth earlier in the year had partly been accounted for by an earlier-than-usual spike in car sales, reflecting changes in the timing of new registrations. That was expected to unwind in the second half of the year. Retail sales growth appeared, however, to have strengthened during the year according to data for Q3 and some surveys, so that overall consumption growth might not slow much. Moreover, strong output growth in Q3, evidence of strong tax receipts (including corporate taxes), and the relative strength of household money and credit growth and of the housing market suggested that strong final domestic demand growth might have continued beyond the first half of the year. 5 There were, though, some possible indications that consumption growth had steadied. Indicators of retail sales in Q4 appeared firm, but probably not more so than during Q3. Both the CBI Distributive Trades Survey and the CIPS Services Index pointed to a moderation of activity. Consumer confidence measures were positive but had been steady for about eight months, and in particular had not been driven upwards along with the rapid rise in house prices. And some indicators of housing market activity, such as particulars delivered, had ticked down slightly over the past two months. The Committee judged, however, that the recent strength in house prices would tend to support continuing buoyant consumption growth. House prices were generally expected to continue rising over the next year or so at an annual rate which was higher than mortgage interest rates. In the view of some members, the resulting negative own-real rate of interest should, other things being equal, make house purchase attractive. This could alternatively be thought of as expected real capital gains more than offsetting the real cost of borrowing (measured by mortgage interest rates less expected consumer price inflation). 6 Other parts of the economy were, however, facing quite different own-real interest rates. In particular, the nominal cost of borrowing for companies was still considerably higher than manufacturing output price inflation, which might hold back investment spending.