Next year the level of contraction is likely to be around 3 per cent for the year as a whole with some gradual recovery emerging later in the year but unlikely to take hold until 2011.
These more buoyant conditions may also encourage businesses to attempt to rebuild profit margins, which will be a factor underpinning inflation over the next year or so. Thus, we believe that if monetary policy maintained its present stance for too much longer, there is little risk of a serious slowdown, but a high risk that the economy in time would overheat.