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mpc: 9 A35 Manufacturing input prices had risen by 1.7% in November, in part reflecting higher oil prices, taking the annual inflation rate to 9.1% - its highest since September 1995. The CIPS input price index had fallen slightly in December. A36 There had been a slight pick-up in output price inflation (PPIY), largely reflecting higher prices of petroleum products. The CBI output price expectation balance, however, had remained well below its long-run average. A37 There had been significant revisions to the National Accounts deflators. The GDP deflator had risen by 2.4% in the year to 1999 Q3, revised up from 1.8%. This mainly reflected upward revisions to both the government and consumers' expenditure deflators since the start of 1998. The consumers' expenditure deflator had risen by 2.4% in the year to Q3, revised up from 1.8%; on the revised data, inflation on this measure eased between Q2 and Q3, in line with RPIX inflation. The retail sales deflator had risen by 0.2% in November, the first rise in 9 months, leading to a slight fall in the annual rate of deflation. A38 RPIX inflation was 2.2% in November, unchanged from October. RPIX service price inflation had remained at 3.9%, while RPIX goods price inflation had picked up slightly to 0.5%.

VI

Reports by the Bank's regional Agents

A39 The Bank's regional Agents reported a continued moderate recovery in manufacturing activity, although volume growth had been stronger than value growth in many cases. There had been little evidence of capacity constraints in manufacturing firms. Service sector output growth had stabilised at a high rate. IT-related activity had been flat approaching the year-end but it was expected to resume strongly in the New Year. There had been some evidence of increased capacity constraints in the service sector, mostly as a result of skill shortages. Construction activity had remained strong overall, but with wide regional variations. A40 Agents reported an improvement in retailers' year-on-year sales growth in December, with early indications that there had been solid Christmas trading. New car sales had been broadly flat and the used car market had also remained weak.