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mpc: 6 A28 The deficit on trade in goods had narrowed to £1.9 billion in August from £2.2 billion in July. The EU deficit had widened slightly to £0.4 billion, but the non-EU goods deficit had narrowed to £1.5 billion. The non-EU deficit had narrowed further to £1.2 billion in September. Excluding oil and erratics, export volumes had risen by 5.8% in the three months to August and imports had risen by 3.8%. Although export growth over the past half-year had been partly driven by erratic items, underlying export growth (excluding oil and erratics) had also been positive. Based on monthly data, the 1999 Q3 net trade contribution to GDP seemed likely to be positive. A29 Looking ahead to Q4, survey evidence had suggested continuing strong growth. The CIPS purchasing managers' survey of manufacturing showed a slight improvement in the headline index, to 54.2 in October, with the output index above its no-change point of 50 for the seventh consecutive month. The CBI Quarterly Industrial Trends survey had shown a sharp improvement of manufacturing sector confidence in Q3. The BCC survey for Q3 had shown a marked improvement in domestic and overseas orders, in both the manufacturing and services sectors. Domestic and overseas orders balances had appeared to be moving in line over recent quarters - though growth in domestic orders remained stronger. The CIPS Services Survey had shown an increase in activity in October (though the rate of growth had been the slowest since March). The CBI Distributive Trades Survey had shown a rise in retail sales in October (though with growth slowing, and sales considered to be slightly below average for the time of year). The improved outlook had also been broadly consistent with other surveys such as those by the Institute of Directors and the Engineers' Employers Federation. The latest surveys when taken together suggested quarterly growth in GDP continuing in Q4 at broadly the same rate as in Q3.

IV The labour market

A30 LFS employment had increased by 99,000 (0.4%) in the three months to August compared with the previous three months - up sharply on the increase in the three months to May. In full-time equivalent terms, growth had been the strongest since the summer of 1998. Total hours worked had risen by 0.4% during the three months to August over the previous three months. Average hours worked had risen by 0.1%, although they had remained weaker than in the same period the previous year.