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mpc: 2 than those in Germany in October and November. Annual growth in industrial production in the major three euro area economies had fallen slightly to 0.9% in September, reflecting growth of 3.1% in France, 0.3% in Germany and ­0.7% in Italy. But a strong rise in German manufacturing orders in October and a rise of industrial production of 1.4% in the year to October had suggested a possible future pick up in German activity. The euro area broad money measure M3 had risen by 6.0% in the year to October. Annual inflation in the euro area had risen slightly in October to 1.4%, mainly reflecting the rise in energy prices over the year. Survey measures had suggested that inflation was expected to rise further in coming months. A5 Japanese GDP had fallen by 1% in Q3, a steeper fall than market expectations, although the level of GDP in the previous quarter had been revised up substantially. Industrial production had fallen by 2.3% in the month to October, but it had still been 1.7% higher than a year ago, and overtime hours had risen in recent months. Inventories had continued to decline, falling by 8.8% in the year to October. The unemployment rate had remained unchanged at 4.6% in October. Base money growth had slowed to 5.5% in the year to October, but growth in broader measures had picked up slightly, and bank lending had continued to recover from the low in August. The consumer price index had fallen by 0.7% in the year to October, but excluding food had fallen by only 0.1%. The Economic Planning Authority had released details of a further ¥18 trillion economic revival package.

II

Monetary and financial cond itions

A6 Narrow money had grown strongly in November. After adjustment for seasonality and the introduction of the new 50p and £2 coins, notes and coin had increased by 1.4% on the month, and the twelve-month growth rate had risen to 8.9%, the highest since 1980. The usual practice of current updating of seasonal adjustment meant that part of the rise in the seasonally unadjusted data in November had been treated as a seasonal effect, depressing the seasonally adjusted figure relative to an alternative measure based on non-updated seasonal factors. Part of the pick up in November had reflected special effects, such as a temporary increase in cash holdings relating to government Winter Allowance payments. But even after adjusting for an estimate of the quantitative impact of these factors, narrow money growth had still been unusually strong, consistent with evidence from other sources of robust growth in retail sales.