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MINUTES OF THE MONETARY POLICY COMMITTEE MEETING HELD ON7-8 NOVEMBER 2001

1 Before turning to its immediate policy decision and against the background of its latest projections for output and inflation, the Committee discussed the world economy; demand and output; money, credit and asset prices; the labour market; prices and costs; and some possible tactical considerations.

The world economy

2 The Committee explored whether or not there might be different signals on the position of the global economy from the official data released over the month, surveys, and asset prices. Some contrasts were, at least at first sight, arguably present in the US data and surveys. On the one hand, output had fallen by only 0.1% in Q3 over Q2, rather less than generally expected. Recent data suggested that some elements of consumer spending had recovered somewhat following a dip immediately after 11 September; for example, spending on vehicles had been robust, although it was difficult to assess how much that was due to 0% finance deals and so how persistent it would be. On the other hand, surveys had been very weak. The National Association of Purchasing Managers' (NAPM) index for manufacturing had fallen from 47.0 in September to 39.8 in October, the largest monthly fall since 1984. The non-manufacturing NAPM had also fallen sharply ­ from 50.2 to 40.6 ­ over the same period. The US Conference Board measure of consumer confidence had dropped from 97.0 to 85.5, although the Michigan measure had risen slightly. The one area where the official data were conspicuously weak, and so apparently more consistent with the picture from surveys, was the labour market. Unemployment had risen from 4.9% to 5.4% in October, and payrolls had dropped by 415,000, with September's fall revised up to 213,000. 3 Albeit to a lesser degree than for the United States, the signals from data for the euro area were also mixed. On the one hand, there were perhaps some signs of stabilisation in recent industrial production and consumer spending data. On the other hand, business confidence had fallen from -12 in September to -16 in October. The manufacturing purchasing managers' index (PMI) was down to 42.9 from 45.9 in September, and the services PMI had dropped from 49.0 to 46.7. Consumer confidence had fallen too. 4 One possible explanation for these mixed signals was that the official data showed that the world economy had been slowing less rapidly in the period leading up to 11 September than the Committee