The need to form as up-to-date and reliable a picture of the current state of the economy as possible means that the MPC makes extensive use of business surveys alongside the official data. That includes not only the quarterly Industrial Trends survey and its monthly sibling, but also the other, more recent, CBI surveys, such as those covering the distributive trades and service sectors. The various surveys carried out by other organisations, such as the Chartered Institute of Purchasing Supply and the British Chambers of Commerce, are also valuable sources of information for us. Moreover, we have our own network of 12 regional agencies, whose role is to collect intelligence as to what is happening on the ground. Collectively, our regional Agents have about 8000 business contacts and they represent an important additional source of timely information for us. The uses of the survey data are varied. First, different indicators more often than not seem to tell different stories and we need to figure out which is the right one. For instance, at the current juncture, there is a marked discrepancy between the official data on the volume of retail spending, which points to considerable robustness this year – including whopping growth of 3.6% in May alone, though that was fully reversed in today’s release for June – and the Distributive Trades survey, which suggests significant weakness (see Chart 2).
BIS Review 95/2008  5  I hope that this gives you a sense of the use we make of business surveys, and business intelligence more generally, in making our regular assessment of the state of the economy each month, before taking our decision on the appropriate level of Bank Rate. The timeliness of this information is particularly important at the current juncture, when the economic climate is changing rapidly. The global and UK economies have been subject to two large shocks of uncertain magnitude, duration and impact. The first is the continuing de-leveraging in the banking system and the attendant squeeze on the terms and availability of credit. The second is the fairly relentless rise in commodity prices, especially that of oil, driven in part by the robust growth in demand in the emerging economies. These two shocks both depress output growth, though they have divergent effects on inflation. In our May Inflation Report, our central expectation was for four-quarter GDP growth to slow markedly through this year, reflecting both subdued real income growth and tighter credit supply (see Chart 7, which also includes the same backcast information as Chart 6). It was then expected to gradually recover through 2009 as credit conditions slowly improved. The corresponding projection for CPI inflation is shown in Chart 8 (note that no uncertainty is shown for the past, as the data for CPI inflation are rarely revised).