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mpc: 2 employment of the unwinding of government job programmes. By contrast, French employmenthad picked up strongly in Q4. The annual growth rate of euro-area M3 in January had beenaffected by the impact of the introduction of the euro a year previously. There had been a furtherincrease in both total and intermediate annual PPI inflation in the euro area in December. Euro-area HICP inflation had risen to 2% in January. HICP energy price inflation had risen throughoutthe euro-area. The sharpest rises had been in Germany, probably due to tax effects. A5 Official sources had suggested that the first GDP release for 1999 Q4 in Japan might be negative. That was supported by Japanese household expenditure data (published by theEconomic Planning Agency), which had fallen by 2.2% in 1999 Q4. By contrast, output data forboth industry and services had been flat and consumer confidence had strengthened over the sameperiod. New construction orders had strengthened in January 2000, almost entirely due to growthin private sector orders. The narrowing of the Japanese trade surplus in January had been largelydue to the movement in oil prices. Y2K effects on base money in Japan had largely disappearedin February. Both core and headline CPI inflation had remained negative in January (withheadline inflation of -0.9%), as had final PPI inflation. Raw materials inflation had increasedsharply in January, and there had been a small rise in intermediate PPI inflation. A6 Industrial production growth in Latin America had strengthened in December. Growth had fallen back slightly in Asia and the transitional economies, though it had remained strong inemerging markets as a whole. Capacity utilisation in South Korea had risen above pre-crisislevels. CPI inflation in December had fallen in Latin America and had remained flat in Asia.

II

Monetary and financial conditions

A7 The stock of notes and coin had stabilised in February, following the sharp distortions around the year-end, so longer-term growth rates based on February data could be expected togive a better idea of the underlying picture than those based on either January 2000 or December1999. The twelve-month growth rate in February had remained strong at 8.4%, in the middle ofthe 8%-9% range cited for the underlying rate in February's Inflation Report. A8 The stock of M4 had fallen by £2.9 billion (-0.4%) in January taking the twelve-month growth rate to 2.6%, the lowest on record. The fall on the month had been accounted for by arundown in both households' and private non-financial corporations' (PNFCs') deposits. Otherfinancial corporations' (OFCs') M4 deposits had continued to stabilise after the sharp falls earlierin 1999. OFCs' M4 rose by £1.5 billion (0.8%) in January, taking the twelve-month growth ratefrom -6.2% to -4.0%.