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mpc: 4 maturities of around one year. The falls in long nominal rates seen in late October had continued in the first week of November. This had partly reflected a global bond rally, but the fall in UK gilt yields had been greater than in other countries. Corporate bond yields at comparable maturities had also fallen. Long real interest rates derived from the index-linked gilt market had shown a similar pattern to long nominal rates. Although market expectations of inflation in the short to medium term (derived from nominal and index-linked gilts) had fallen immediately after November's MPC meeting, the decline had largely been unwound later in the month. Survey measures of inflation expectations for 2000 had been broadly unchanged on the month. A12 Quoted retail rates data had suggested that the November rate rise had been almost fully passed through to standard variable mortgage rates. Fixed-rate mortgages had risen by less, reflecting movements in swap rates. A13 The FTSE All-Share index had risen by 6.2% since the November meeting. Small capitalisation stocks had outperformed the FTSE 100 and All-Share indices, rising by 12.2%. A14 The sterling effective exchange rate index had appreciated by 0.3% since the November MPC meeting, and by 0.8% compared with the starting point for the November Inflation Report projection. Over the month, sterling had appreciated against the euro, but had fallen against the dollar and yen. Monetary news had appeared to explain much of the move in the euro-sterling bilateral rate.

III

Demand and output

A15 Quarterly GDP growth at constant market prices had been unrevised, at 0.9%, in Q3. The annual growth rate had also been unchanged at 1.8%. Total industrial production had risen by 1.2% in Q3 and by 0.3% on a year earlier. Manufacturing output had grown by 1.0% in Q3, the first time since 1995 Q2 that manufacturing output growth had been higher than services, though the level of manufacturing output had still been 0.2% lower than a year earlier. Services output had grown by 0.9% in Q3, revised down from 1.0% in the first release, with annual growth at 2.4%. Construction output had grown by 0.5% in Q3.