But the pressures we currently face go well beyond that. The effects of BSE and then of foot and mouth disease on agriculture, and the impact on the rural economy more generally, have been wholly abnormal. And the pressures on the wider economy have recently been hugely aggravated by the international economic environment - first, by the persistent strength of sterling against the euro; then, by the global economic slowdown - including the dramatic contraction of activity in the previously booming high-tech sectors, and most recently by the vicious terrorist attacks in the United States. With the best will in the world, there is nothing that we can do - certainly not through our domestic monetary policy - that goes to the causes of these problems. That's obviously true in the case of the problems in agriculture. Many people suppose that interest rates would have a predictable effect on exchange rates, but in fact it's not as simple as that. Many other factors influence exchange rates which can respond perversely to interest rate changes even for quite long periods of time. Despite the 4% cut in the US rates this year the dollar is still stronger against the euro - where rates have fallen by only 1% - than before the interest rate cuts started. And sterling, too, rose against the euro even though we cut interest rates earlier, and by more, than the ECB.
The conundrum in fact has been the persistent relative weakness of the euro, since its introduction, and I very much welcome its modest recovery since the summer. But on top of this exchange rate effect, external demand for goods and services produced in this country has been adversely affected by the unusual simultaneous slowdown in the world's three largest currency areas - the US, the Eurozone and Japan - that we have seen this year. And the terrorist attacks - with their inevitable effect on business and consumer confidence at least in the short term - could not have come at a worse time. We can't, as I say, do anything directly ourselves to reduce the negative impact on the economy of these exogeneous shocks. What we can do is to try to compensate for them by encouraging the growth of domestic demand, and in particular consumer spending. And that in effect is what we have been trying to do through six cuts in interest rates so far this year, which have brought the mortgage rate, for example, to its lowest level for years. In the year to June final domestic demand grew by 3½%; but a fall in external demand helped to reduce the growth of total output to just over 2¼%. Overall UK manufacturing output in particular fell by 2% in the year to August, and while that is substantially less than the equivalent fall in Japan (of over 11%) and in the US (of 5½%), that's cold comfort to British industry.