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mpc: 2 encouraging and suggested that any investment overhang in the United States might now be quite limited. Market and business concerns about the recovery, reflected in rather weaker equity market prices, could be associated as much with doubts about the extent to which corporate profitability would recover as with doubts about the sustainability of the output recovery itself. Both fiscal and monetary policy in the United States remained supportive. 5 Turning to developments elsewhere in the world economy, the Committee noted that there was little change in the euro area. Confidence had again improved a little and industrial production was somewhat stronger, but it was notable that ­ despite the slowdown last year ­ core inflation remained stubbornly persistent and there were signs that this might now be leading to pressure for higher wage settlements. Recent activity data from Germany seemed quite weak, particularly in the light of the sharp US recovery. In Japan, industrial production had increased in the first quarter (the first quarterly increase since the end of 2000) but, as in the euro area, this largely reflected the external stimulus provided by the US recovery. There was little evidence, either in Japan or in the euro area, of any domestic engine for sustained growth. It was, however, encouraging, given the ICT-related origins of the slowdown, that there were a number of signs around the world that high-tech activity was strengthening: electrical machinery production had picked up in a number of Asian economies, notably in South Korea; computer production in the United States was now 6% above its trough; and even in Europe, sales of semiconductors had increased.

Money, credit and asset prices

6 There was little evidence in the monetary data of any slowing in the pace of consumer expenditure growth in the United Kingdom, with notes and coin 8% higher in the year to April. Broad money growth had, however, eased to 5½% on an annual basis in March, and was growing less rapidly than this on an annualised three-month or six-month basis. The main feature of the data for total credit remained the marked difference between the household sector, whose use of credit was some 12% higher than a year ago, and the corporate sector, whose borrowing from the banking system had increased by only 5% in the year to March and was in fact lower in the first quarter than in the fourth quarter of last year. Manufacturers in particular were continuing to repay debt. Overall, therefore, these sectoral differences were increasing. 7 Measures of house prices now uniformly signalled a rapid rate of increase, with both the Halifax and the Nationwide indices increasing at over 15% at an annual rate. Even the DTLR index (which