Fiscal policy is also likely to be supportive of a recovery. Elsewhere, the euro area has seen some decline in business confidence, although consumer confidence remains high, and in Japan the prospect for domestic demand growth appears weak. The central projection is for this growth in world trade to halve in 2001. In recent months, however, the data have moved rather erratically, affected by adverse weather, travel disruption and foot and mouth disease. Figures for business investment have been revised up significantly since the February Report and the many explanations that were provided for the apparent weakness of investment growth have proved redundant.
Government spending is planned to rise rapidly.
So the imbalance between strong domestic demand and weak net trade has continued. Hence the contrasting fortunes of the internationally exposed sector, on the one hand, and those producing primarily to meet final domestic demand, on the other. The labour market has become, if anything, even tighter over the past three months. Employment continues to grow at slightly above the trend rate of increase of the labour force but there are some indications that the labour market is reaching a turning point. Pay pressures have remained subdued.