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mpc: 2 A5 Annual industrial production growth in France and Germany had continued to accelerate in November (measured on a three-month moving-average basis). Production growth in Germany had remained buoyant in December, and though orders had fallen in that month, the underlying trend remained strong. Euro-area business confidence had improved for the ninth successive month, while consumer confidence had remained stable at a high level. Annual euro-area HICP inflation had accelerated to 1.7% in December, from 1.5% in November. HICP inflation excluding energy, food, alcohol and tobacco had increased by less, to 1.1%, from 1.0% in November, while annual euro-area total producer price inflation had increased to 3.0%, mainly reflecting energy price increases. Annual euro-area labour cost growth had increased slightly in 1999 Q3, to 2.2%, from 2.0% in Q2. A6 The average annual growth rate of euro-area M3 had increased to 6.1% in the three months to December, from 6.0% in the three months to November, still well above the ECB's reference rate of 4.5%. But a number of special factors had been distorting the annual growth rate of M3, and would continue to do so for several months. The ECB had increased its refinancing rate by 25 basis points to 3.25%, reflecting an increase in the risks of `second-round effects' from oil and non-energy commodity prices, developments in the euro exchange rate, and expectations of higher inflation rates in the next few months. A7 Japanese data on industrial production and the tertiary sector suggested that output growth in 1999 Q4 had increased moderately. There had been minor revisions to the National Accounts data for Q3, but these had left quarterly GDP growth unchanged, at ­1.0%. Annual export volume growth had increased in the three months to December. But private demand indicators had remained weak. Annual retail sales growth had remained negative, and the rate of decline of workers' incomes had increased in December. Annual CPI inflation had remained at ­1.1% in December. But, excluding food, annual CPI inflation had been less negative, at ­0.1%. And the rate of decline of wholesale prices had slowed, to only ­0.5% on a year earlier in January. Annual growth in M2+CDs had fallen to 2.6% in December, from 2.9% in November.

II

Monetary and financial conditions

A8 Narrow money had grown very strongly in January. After adjustment for seasonality and the introduction of the new 50p and £2 coins, notes and coin had increased by 2.0% on the month, and the twelve-month growth rate had risen to 13.0%. The published growth rate is based on the average levels during the month and this had been distorted upwards by the effects of the millennium persisting into the early weeks of January. The distortion had affected January's level proportionately more than