There is little reason that I can see to suppose that global growth will not recover to at least its earlier trend rate over the next 2-3 years once the immediate shock has been absorbed. But in the meantime, the UK cannot be wholly immune from a more pronounced or prolonged global slowdown in the short term than we had previously expected - if that is indeed what occurs - even though we are better placed than some others to withstand it. Inflationary pressures remain well contained. Domestic demand appears to have been sustained into the third quarter, underpinned by increasing government spending in line with the Chancellor's intentions and by the easing of monetary policy. And consumer confidence in this country - on most of the evidence - seems to be holding up well despite the terrorist attacks. While business confidence generally weakened further in the third quarter, it remains stronger in the services sectors than in manufacturing. And on the basis of last week's BCC survey - it is notable that confidence in the services sectors here in Wales actually increased quite strongly. No-one can know quite how things will turn out in the present climate of uncertainty. We cannot rule out a further slowdown here in the UK. But all-in-all I am still persuaded on the evidence that we will avoid the overall recession that is widely spoken of in the media - though it may be a bumpy ride for a time.
The imbalance within the economy which these figures reflect - notably the continuing imbalance between the internationally-exposed companies and sectors, which are having a really rough time, and the domestically-orientated sectors which are doing much better - is certainly not ideal. The continuing imbalance is not without risks. On the one side, we may find it increasingly difficult to offset the negative impact of the global slowdown in the face of increasing domestic private sector debt; and if the slowdown in the UK spreads beyond manufacturing to the services sectors it may cause unemployment to rise which in turn could slow the growth of consumer spending. But, on the other side, we may find it difficult to moderate the growth of domestic demand when the international environment improves. There is no doubt that if we could simply redraw the map, we would opt for stronger external demand and weaker consumption growth. That would represent a more sustainable balance within our economy. Sadly that is a choice that we are not immediately free to make. Doing what we can to encourage domestic demand growth to compensate for the global economic weakness is certainly preferable to an unnecessary slowdown in the economy as a whole. And that is the path we must for the time being continue to pursue. 2  BIS Review 85/2001  So what then are the prospects?