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mpc: 8 The key issue for the Committee was to assess whether the euro-area recovery would continue. The latest data, although mixed, suggested that the downside risks had diminished. Looking first at demand, export growth had been modest in 2003 Q4, and looked likely to be so in 2004 Q1, with the effect of the global recovery offset by the appreciation of the euro during 2003. The more recent euro depreciation and the continuing pickup in global activity should provide a modest stimulus to net trade in 2004 and 2005. Investment growth was positive in Q4, but, within the aggregate, the strong contribution from Germany partly reflected a temporary boost from the imminent cut in subsidies to residential construction investment. The increase of 1% in retail sales in 2004 Q1 suggested a pickup in consumption, which had previously shown little growth since 2003 Q1, and recent and prospective tax cuts in several countries might be supportive. Turning to output, indicators of euro-area business activity so far in 2004 had been mixed. The purchasing managers indices for manufacturing and services, taken together, were consistent with a pickup in quarterly growth in Q1. But annual euro- area industrial production growth had fallen slightly in February. German manufacturing foreign orders had also fallen in February, for a second consecutive month, possibly reflecting the influence of the stronger euro. Euro-area business indicators available so far for Q2 on balance suggested continuing positive output growth.