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mpc: 5 2003. Nominal forward interest rates had risen by around 10 basis points up to the ten-year horizon, but had been little changed at longer horizons. Real forward interest rates had risen by around 10 basis points at the ten-year horizon, but had been little changed further out. A19 Between 6 August and 3 September, forward implied inflation expectations had risen at horizons up to around ten years, but were little changed further out. In contrast, there had been little change in survey measures of short-term inflation expectations. According to the HM Treasury survey, mean RPIX inflation expectations for 2003 Q4 and 2004 Q4 had been unchanged in August, at 2.5% and 2.3% respectively. According to the Consensus Economics survey, mean RPIX inflation expectations for 2003 as a whole and 2004 as a whole were also unchanged in August, at 2.7% and 2.3% respectively. A20 Quoted interest rates on household borrowing had generally fallen further in August. The average standard variable mortgage rate (SVR) quoted for existing borrowers had fallen by 18 basis points in August, reflecting the repo rate reduction in July. However, the average two-year fixed mortgage rate had risen by 48 basis points. A21 The sterling effective exchange rate index (ERI) had risen by 0.8%, to 99.5, between 6 August and 3 September. Much of this movement could be accounted for by changes in relative interest rates. Sterling had appreciated by 2.3% against the euro, but had depreciated by 2.6% against the dollar, during this period.

III

Demand and output

A22 Estimated GDP growth at constant market prices in 2003 Q2 had been 0.3% in the Output, Income and Expenditure release, unrevised from the preliminary estimate. The annual growth rate had also been unrevised, at 1.8%. GDP excluding the primary sectors (agriculture, mining and utilities) had risen by 0.3% in Q2. A23 Service sector output growth had been revised down by 0.1 percentage points, to 0.3%, in 2003 Q2. Within the service sector, output growth of the distribution, hotels and catering sector had been revised down by 0.1 percentage points, to 1.1%. Output in the transport, storage and communication sector had grown by 0.3%, while output in the government and other services sector had risen by