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mpc: 5 been that it was thought very unlikely that the surveys would bounce back as they had done in analogous circumstances in late 1998 and early 1999. Of course, the recovery in the surveys in part reflected that decision. But a uniform and substantial improvement of this kind was unusual and should not be ignored. It remained to be seen, however, whether it would be sustained, and whether it would be translated into actual output growth. 13 Consumption growth had slowed to 0.9% in the fourth quarter, from 1.1% in the second and third, and was expected ­ on the basis of retail sales data and private vehicle registrations ­ to ease further in the first quarter. But it was unclear whether this trend would continue: the CBI Distributive Trades survey and vehicle registrations in April had been strong, as had household borrowing, consumer confidence and the housing market. All suggested considerable support for continued robust consumption growth. 14 The Committee had discussed extensively the likely demand and output implications of the Chancellor's 17 April Budget announcements in preparing its latest Inflation Report projections. Initial outside commentary had suggested that there would be no net effect on demand, as both spending and taxes had been increased with little net effect on the fiscal position. Analysis for the Committee had, however, made it clear that there could be a material impact on activity and on inflation. This would be principally because of the demand implications of a balanced budget fiscal expansion. There might also be effects as a result of the way firms and workers adjusted to the increased levels of employer and employee National Insurance contributions. 15 There were likely to be two main factors which would determine the size of the balanced budget stimulus. The first was the extent to which the import intensity of government spending on goods and services differed from that of private sector spending. This was difficult to judge, since it would depend on the composition of the additional spending. The second was the extent to which increased government spending would be used to increase the wages of existing public sector workers (which would in effect simply be a transfer from those paying the higher taxes). This would reduce the scale of the demand effects. But the Budget still seemed likely, on this analysis, to add to aggregate demand growth once the new spending plans took effect. 16 Other possible consequences of the tax changes were discussed. It was possible that firms might respond to any real wage resistance (which would increase the relative cost of labour) by reducing employment and output. Households might reduce consumption in anticipation of the additional tax