to fall back towards the 2 % target as the growing margin of spare capacity in the economy held back pay and price increases. since may, inflation has turned out higher than expected and oil prices have risen further, notwithstanding some moderation in the past week or so. but the news on activity has not been very good either, with some distinctly downbeat business surveys, including yesterday ’ s industrial trends survey, further weakening in the housing market and continued fragility in the financial sector. all this points to a worse near - term prospect for both growth and inflation. the net impact of this on the outlook for inflation in the medium term is less clear, though for our considered view on that, you will have to wait until our august inflation report is published in a couple of weeks time. moreover, there are considerable risks surrounding the central outlook. a particular risk on the upside is that the extended period of elevated inflation leads to an acceleration in pay and causes inflation expectations to rise. that could lead the higher inflation to become embedded. but on the downside, there is a risk that the credit crunch leads to a deeper and more prolonged slowdown, leading to greater slack in the economy and causing inflation to undershoot our target. in setting policy, we have been trying to balance off these risks against each other. in making that judgement, the more accurate a picture we have of the economy, the better. so the industrial trends survey, as well as the other business surveys, will continue to be a crucial input into forming that picture. let me therefore conclude by wishing many happy returns to the industrial trends survey on the occasion of its 50th birthday. we hope that you and your younger siblings will continue to flourish in the years ahead. thank you!

the outlook for business investment. other forward - looking questions can also prove valuable. for instance, at the current juncture, with cpi inflation well above our 2 % target, we need to judge how much further it will rise and for how long that might persist. past experience gives us some guide as to the speed at which higher commodity prices pass down the supply chain and the extent to which those movements are amplified or attenuated by movements in other costs and prices. but the questions on pricing intentions contained in the business surveys represent a valuable additional source of information on near - term inflation pressures. a third use of surveys is in helping the mpc diagnose the causes of recent developments. here, the quarterly industrial trends survey stands out as particularly useful because it has a rich set of questions that explore companies concerns. for example, it has questions about the factors limiting investment, exports, and output. responses to those sorts of questions can, for instance, help us work out how businesses have been affected by the recent depreciation of sterling, and the tightening in credit conditions. a fourth use of the surveys is in providing measures of variables for which there is no official counterpart. in particular, the amount of economic slack in the economy is a key determinant of inflationary pressures. we have official indicators of slack in the labour market – unemployment, vacancies and the like – which is one factor determining pay growth. but we have no official measures of the amount of slack within businesses, which potentially affects pricing pressures. business surveys such as the industrial trends survey do, however, ask how intensively firms are working their capital ( see chart 5 ). and the mpc draws on this information in forming a judgement about the overall margin of spare resources in the economy. a fifth, and perhaps less obvious, use of survey information is in refining our picture of the past. i noted earlier that the official data tends to get revised for some while after it is first released. but it turns out that there are some systematic patterns in the historical revision process. moreover, for some series, we have found a tendency for revisions to be in the direction of reducing the discrepancy with the corresponding survey information. so rather than just taking the latest vintage of official data at face value, we can employ statistical techniques to exploit this information in order to refine our assessment of the past. an example of this approach, drawn from our may inflation report, is shown in chart 6. this