2 A recovery has also started at an earlier stage in the cycle than in the early 1990s, when the economy “bumped along the bottom” for a number of quarters before growth became firmly established. It is particularly encouraging that manufacturing output has been growing particularly strongly, up by 5.3% on a year ago in the third quarter. This is the strongest year-on-year manufacturing growth we have seen since the end of 1994, sixteen years ago. The latest business surveys are generally positive about the continuation of the growth of manufacturing output. And the CBI’s latest quarterly Industrial Trends Survey, released last month, shows the strongest investment intentions in manufacturing since 1997 and the most significant employment growth since 1989. These are all encouraging signs for the rebalancing of the UK economy – towards manufacturing and away from services – which most economic analysts have suggested is likely to be needed over the course of this recovery. These rates of growth – across the UK economy as a whole and in manufacturing – would not be possible unless the demand climate had changed very significantly over the course of the last 12–18 months. The global economy has bounced back strongly, with the IMF now projecting world growth of 4.8% this year and 4.2% next year. Asia and a number of other emerging market economies are providing a powerful engine of growth to the world economy at present. Though the news is more mixed from the US and Europe, their economies are still on a recovery track.
The euro has experienced a similar episode recently. This situation seems to be about to correct itself, now that more and more signs point to a closing of the growth gap between the United States and continental Europe. Thus, the potential appreciation of the euro is more than ever a topical question. This potential clearly reflects the economic soundness, dynamism and strengths of the euro area, supported by the structural reforms under way. As these winning cards, if I may say so, are now materializing more and more clearly, I am confident that market participants will soon share our analysis. 5  BIS Review 52/2000