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mpc: 4 registration. Business investment had fallen in Q3, and growth in investment as a whole in the quarter was barely positive. Within the total, manufacturing investment continued to fall, perhaps reflecting past pressure on margins, and there had also been a slight decline in investment by the services sector, after previous estimates had been revised up to show more rapid growth over the previous year. It was possible that some of the weakness in business investment reflected a pause in IT spending ahead of the new millennium. Government investment had increased sharply in Q3, although it remained well below planned levels. The level of government consumption expenditure had been revised down, though growth in Q3 was stronger than previous estimates. 15 Final domestic demand in Q3 was now estimated to be 3.2% above its level of a year earlier, compared with 4.1% in Q2, a figure which had itself been revised down from 4.5% in the previous estimate. Moreover, it seemed unlikely on present indications that year-on-year growth would pick up significantly from the 3%-3½% range either in 1999 Q4 or the present quarter. While such growth was likely to be too high to be sustainable in the long run, it was significantly lower than the 4%-4½% rates reported earlier in 1999, before the latest revisions had been made. The quarterly growth rate of final domestic demand had slowed more sharply, from 1.2% in 1999 Q1 to 0.4% in Q3, which if it persisted would no longer be above its sustainable rate. However, surveys and other evidence suggested that it could pick-up in Q4. 16 While final domestic demand growth had fallen back, net external demand had been stronger in Q2 and Q3, making a positive contribution to GDP growth on a quarterly basis (though this might not continue into Q4). As a result growth in GDP on a year ago was only 0.7 percentage points lower in Q3 than growth in domestic demand, compared with a gap of 2.6 percentage points in 1999 Q1. To that extent the recovery was now better balanced. The stronger performance of net exports might, if sustained, tend to put pressure on resources unless domestic demand growth continued to moderate. However, there was spare capacity in many export and manufacturing sectors following their recent downturns. 17 There was also some evidence of better balance in the economy from the output data, with both manufacturing and industrial output up 1.2% over the previous quarter in Q3, while the services sector had grown by 0.6%. Such a recovery in industrial output was consistent with the upturn in external demand from Continental Europe; but the slowdown in services, which was in part due to lower growth in the financial and business services category, was less easy to explain, unless it reflected a pause ahead of the new millennium.