mpc.theyserveforyou.com

mpc:

MINUTES OF THE MONETARY POLICY COMMITTEE MEETING HELDON 8-9 DECEMBER 1999

1 Before turning to the immediate policy decision, the Committee discussed demand and output;money and asset prices; prices and costs; the world economy; the labour market; and otherconsiderations relevant to the decision.

Demand and output

2 Final domestic demand in Q3 had turned out as expected at the time of the November InflationReport. However, consumption had been a little stronger than expected, while investment was alittle weaker. On the basis of the pattern of revisions over recent years, it was quite possible that theQ3 investment figures could be revised up. However, it was also possible that the weaker figurespartly reflected a `millennium pause' in IT-related investment spending. The slightlystronger-than-expected consumption numbers reflected the ONS' attempts to capture the changingseasonal pattern of car registrations. The figures for consumption growth in the first half of the yearcould therefore be revised down, reflecting the latest estimates of the seasonal factors, when theNational Accounts for Q3 were published. Abstracting from these seasonal effects, the underlyingpicture for consumption growth in Q3 appeared broadly in line with expectations at the time of theNovember Inflation Report. Looking beyond Q3, the latest evidence suggested that car registrationswere turning out quite weak ­ possibly reflecting expectations of reductions in car prices in the nearfuture, in which case car sales, and hence consumption, might subsequently pick up at some point. 3 The Committee discussed other recent indicators of household consumption. Retail sales growthhad remained strong at the beginning of the fourth quarter, though the three-month on three-monthgrowth rate for October was slightly lower than it had been a few months ago. The Bank's regionalAgents' contacts were reporting some strengthening of retail activity, but the picture seemedsomewhat weaker than the official data. There were several possible explanations. First, salesvalues were rising less quickly than volumes, since the retail sales deflator was falling, and thismight be affecting contacts' responses. Second, retail floor space was probably still rising ­ and thiswas reflected in the difference between total sales and like-for-like sales in the British RetailConsortium survey. Third, it was possible that the Agents' retail contacts were weighted moretowards those sectors that were losing market share, such as department stores, and less towardsdiscount stores.