% target. but that hasn ’ t been achieved at the expense of consistently high interest rates, and weak growth and employment, as many people feared that it would be. in fact nominal interest rates have been as low they ’ ve been for 40 years ; the overall economy has grown without interruption quarter by quarter - at an average annual rate of 2¾ %, which is comfortably above its long - term trend ; the number of people in employment has risen fairly steadily - and is still close to its all - time high, while the rate of claimant count unemployment has fallen from 9. 6 % to 3. 1 % - the lowest its been for more than 25 years. and what ’ s true for the uk economy as a whole is broadly true for every region of the uk, including the north west region. total output in the north west increased year by year from 1992 to 1999 - the latest number i have - though at a somewhat slower annual average rate than in the uk as a whole, at around 1¾ %. the number of people in employment in the region rose by about ¼ million from the end of 1992 to over 3. 1 mn in the past two years. and the rate of claimant count unemployment fell from over 10 % to 3. 5 % - still somewhat above the rate for the uk as a whole, but again the lowest rate for over 25 years. but i ’ m well aware that you don ’ t have to look far beneath the surface to see that at the sectoral or individual business level things are a lot more uncomfortable than these aggregate figures might suggest. to a degree that ’ s always going to be true. competition - at both the national and international level inevitably means the expansion of some sectors or businesses at the expense of others. yet it is a necessary driver of the increasing economic efficiency and higher sustainable growth rate that we need to satisfy our aspirations for improving living standards. but the stresses we ’ ve seen within our economy in the past few years go well beyond normal competitive pressures. for the most part they originate abroad, with, first, the asia crisis and its aftermath in the late 1990 ’ s, happily substantially offset, as far as the uk was concerned, by strong growth in the united states, but then last year by the sharp, synchronised, slowdown into negative growth in most of the world ’ s major economies. although the pressures were not confined to manufacturing, and were not uniform within manufacturing, manufacturing was hit harder than

other sectors. manufacturing output fell from its peaks in the year 2000, to its trough last winter by over 16 % in japan, by 7½ % in the us and by 6½ % in germany. and manufacturing employment fell by 7¼ % in japan, 9½ % in the us and 3 % in germany. in this country manufacturing output fell from peak to trough by around 7 %, and manufacturing employment by some 6 %. so we were not alone in what happened and the impact was not obviously worse than elsewhere. that of course is cold comfort to the manufacturing businesses that were most affected, and to the regions - including the north west, where there is a relatively high concentration of manufacturing business. and you were severely affected last year too by the impact of foot and mouth disease on agriculture and tourism. the frustrating thing for us has been that there was very little that we at the bank could do through monetary policy - or indeed that the government could do - to address the problems at source. that ’ s fairly obvious when we ’ re talking about the weakening of demand in the other major economies. some people have suggested that we might have done more to weaken the exchange rate particularly against the generally weak euro - by cutting our interest rates more aggressively, but it really isn ’ t as simple as that : exchange rates don ’ t respond predictably to relative interest rates certainly in the short term ; if anything in recent conditions cutting them further could even have had a perverse effect. what we were able to do, given that inflation was under control, by cutting interest rates as we did last year, was to try to compensate for the external weakness by stimulating domestic demand growth here in the uk. given the weakness of business confidence, and therefore investment, reflecting the external pressures, that meant essentially stimulating consumer demand. we recognised that this was not without risks - risks in terms of the build - up of household debt and of an unsustainable rate of increase in house prices, if not an actual bubble - which, if persisted in for too long, or if carried too far, could lead to an uncomfortable retrenchment further ahead. in a virtual world where we could control these things precisely, we could no doubt readily agree that we would like to see stronger growth in other major industrial countries, a stronger euro, more business investment in the uk and more moderate growth of consumer spending and household debt. that would offer a more certain prospect of better balanced, and therefore more sustainable, growth