Some of the industries reporting lower output late last year included those that produce intermediate goods for the housing and motor vehicle sectors, but others have only tenuous links to those two sectors. Evidently, other industries have experienced a small buildup of inventories, prompting production adjustments.
The Bank continues to judge that the economy is operating slightly below its production capacity, and we expect that it will move back to full capacity in the second half of 2006. Core inflation is projected to return to 2 per cent around the end of 2006.