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mpc: 2 National Association of Purchasing Managers index) did not suggest an imminent recovery in the corporate sector, which therefore carried the associated risk of a spillover into weaker consumption, and yet Consensus forecasts assumed that consumption growth would rise. Although down around 10% since the beginning of the year, on some assumptions equity market valuations remained elevated, and were GDP growth to be more sluggish than implied by the consensus, there would be a risk of further falls in equity prices. Also, estimates of trend productivity might be revised down in the light of the revised GDP data, to a greater or lesser extent depending on how much weight had been given to the earlier, unrevised data for 2000; some commentators were already doing so. If productivity growth were lower, the corporate sector might also be weaker than expected. 5 On the other hand, there were some upside risks. Taken together, the easing of monetary policy and of fiscal policy was large by historical standards and might provide more stimulus than was reflected in the central projections. In addition, the recent data revisions might imply less need for households to increase their saving in order to rebuild balance sheets, so consumption might be stronger than expected. 6 Overall, while the outlook was still highly uncertain, US prospects were judged by most members to remain broadly in line with the assumptions made by the Committee in its May projections, with the risks still skewed to the downside; other members preferred a lower central projection for US growth. 7 The outlook in Japan was weak. It seemed to be heading for recession; and the difficult conjunctural and structural policy issues remained. There had not been much news over the past month. 8 By contrast, there had been quite a lot of news about the euro area, where the outlook was now weaker than previously assumed. There were distinct, but interacting, domestic and external influences at work. In part, the slowdown in domestic demand in recent months might have reflected a supply shock. In particular, spikes in energy prices and food prices, combined with the fall in the euro's exchange rate earlier in the year, had taken consumer price inflation higher than had been expected. That might have reduced growth in real personal disposable incomes and so weakened consumption. The effect of the shock on domestic demand should in principle be temporary, although it might persist for a while, for example if the consequent slowdown in GDP growth prompted the corporate sector to lay off workers. While investment intentions had been stable in recent months according to the latest European Commission survey, surveys of new orders were still weakening, and