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mpc: 6 though its use could grow rapidly. In the first instance one might see greater effects on inter-firmtrade than at the retail level. One much quoted example of internet activity was in books, but recentmovements in prices looked small when compared with the impact of the ending of the Net BookAgreement some time ago. It was therefore important not automatically to assume that the effects ofthe Internet would be bigger than previous shocks. 18 Most of the evidence of weaker prices related to goods prices; indeed the gap between serviceand goods price inflation was as large as at any time since 1992. That gap was much larger thancould be explained by differences in trend productivity growth between the sectors. 19 Within the RPI there were large rises in a few components of the services index ­ notablyinsurance and foreign holidays. Some members thought it was useful to gauge the underlyingbehaviour of RPIX by looking at sub-indices which excluded volatile items, such as fuel prices, orpossibly other `exogenous' items such as seasonal foods and taxes. Other members thought thatsimilar arguments could be applied to changes in prices resulting from exchange rate movements;and that other than in the very near-term, when nominal rigidities existed, it was not useful toexclude items from the index. 20 There had been some recent announcements on water, electricity and gas pricing. Taken togetherthe effect on the short-term profile for retail prices was broadly in line with what had been assumedin the November Inflation Report projections.

The world economy

21 The likely pace of growth in the United States remained subject to various uncertainties. Thelatest stock market rise added weight to the factors underpinning strong consumption growth, but hadalso added to the risks of a sharper slowdown if equity prices were to fall. Inflation had risensomewhat over recent months, although not on the core measure. In any event, the US situationappeared to be rather different from the conjuncture of events in the UK, because of the muchstronger recent productivity growth there. 22 The Japanese GDP data had been heavily revised on release of the Q3 estimate. GDP wasrecorded to have fallen by 1% in the third quarter, but this followed an upward revision to the secondquarter. Overall the new data and revisions back to 1997 left the level of GDP broadly in line withwhat had been expected at the time of the November Inflation Report. The markets had seeminglytaken the view that as much weight should be placed on the upward revisions to the earlier data, ason the weaker Q3 growth number (which was subject to future revision). But if one placed more