Conceivably, household and corporate debt ratios, which increased rapidly during the expansionary phase, will continue the adjustment on which they have embarked in recent quarters, and this requires that agents' debt should grow for some time at a rate below that of income generated. The strong concentration of resources in the real estate market is also being corrected, with a very swift decline in new housing starts, although this has not prevented the emergence of a sizeable housing overhang and downward pressure on prices as the fall in demand has also been very sharp. Nonetheless, cuts in interest rates and in house prices have placed housing affordability indicators at more moderate levels, which will help boost house purchases. Similarly noteworthy is the reduction in the inflation rate in Spain in recent months, which is proving more marked than in the euro area. This decline is underpinned not only by the greater effects induced by the course of oil prices but also by the fall in the prices of industrial goods and in the notable easing in services prices, which are growing below 2%, after having held at a persistent rate of increase of around 4% for many years. It would be most beneficial for the economy to seize this opportunity to make the appropriate reforms to services markets, so that this pattern in moderation may be maintained when household expenditure picks up.
Chart 4: BCC survey activity indicators Balance reporting increased sales/deliveries 60 Services  Manufacturing 40 20 0 -20 -40 -60  Mar-07  Sep-07  Mar-08  Sep-08  Mar-09  Sep-09  Mar-10  Note: Sales/deliveries relate to domestic market Source: British Chambers of Commerce (BCC)  BIS Review 99/2010  5  The CBI’s most recent surveys show a similar picture, with manufacturing industry bouncing back strongly alongside a muted recovery in the services sector (see Chart 5). According to the CBI, retail sales growth appears to have been weak in the last couple of months – though this may reflect some temporary uncertainties relating to the change of government and the Budget, which could have affected consumer confidence and spending patterns. Chart 5: CBI survey activity indicators Balance reporting/expecting increased sales/output 40 Manufacturers output expectations  30  Retail sales  20 10 0 -10 -20 -30 -40 -50 -60  2007  2007  2008  2008  2009  2009  2010  Note: Retail sales – percentage balance reporting annual increase (3 month average); Manufacturing output – percentage balance expecting rise in the next 3 months. Source: CBI Monthly Trends Enquiry and Distributive Trades Survey  I would not want to play down the uncertainties which remain in relation to the growth outlook here in the UK. Access to credit is still being adversely affected by the problems in the banking system.