Fixed capital formation increased at an annualised rate of 1½% in the first half of 2000 when private companies apparently started to increase capital spending in anticipation of stronger growth in domestic and export demand. In sharp contrast to the developments in other expenditure aggregates, real household consumption expenditure rose steeply over the twelve months up to June 2000.
Consumer confidence was high owing to increases in personal disposable income, a fall in bank lending rates and a lowering of effective income-tax rates. Despite this optimism, consumers avoided the use of excessive debt accumulation in financing consumption. Household debt as a ratio of disposable income declined from nearly 60% in the first quarter of 1999 to 57% in the second quarter of 2000.