In short, the efforts of banks over the past seven years to rebuild their balance sheets and improve risk management are paying off. Mortgage rates are at all-time lows. Corporate credit availability has recovered solidly. Lending to small firms is growing again having fallen sharply in the wake of the crisis (Chart 1). Chart 1: Corporate credit growth as a whole recovering and SME credit growth positive(a) 2.0 1.0 0.0 -1.0  Large(c)  -2.0  Total  -3.0  Per cent  SMEs(b)  -4.0 -5.0 -6.0 -7.0 Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 Notes: (a) Rate of growth in the stock of lending on previous year. Lending by UK MFIs. Data cover lending in both sterling and foreign currency, expressed in sterling. Not seasonally adjusted. (b) SMEs are those businesses with annual debit account turnover on the main business account less than £ million. (c) Large businesses are those with annual debit account turnover on the main business account over £ million. 1  The test was tough. In the scenario, gilt yields falls over 100 basis points, Bank Rate falls to zero, unemployment increases by 3 ½ percentage points, and house prices fall by one fifth. Equity prices fall sharply – by around twice their recent falls.
Growth in output per worker has been around 1% recently and is likely to have fallen a little further towards the end of 2015.18 The result is that the levelling off in pay growth has had smaller implications for unit cost growth. In the third quarter of 2015, these grew at around 1½ to 2% on a range of measures, and seem likely to grow at rates a touch below what we expected in August.19 Stepping back, there is little indication of accelerating unit costs we had expected. And certainly, given the scale of foreign disinflationary pressures, current domestic cost growth is not yet consistent with a firming in underlying inflation. This brings me to the final set of factors, core inflation measures. Core inflation measures Around one third of the inflation basket is accounted for by non-energy imported goods whose prices depend on their world prices and the sterling exchange rate. Measures of core inflation, which strip out the direct impact of volatile CPI items like energy and food prices, help to give a read on how developments in these variables combine with domestic cost pressures to drive underlying inflation trends. They also tend to give a sense of headline inflation once the effects from volatile items drop out of the annual comparison.20 Put differently, total CPI is more likely to move towards core than the reverse, suggesting, as a rule of thumb, that inflation is likely to pick up but not to overshoot core CPI a year ahead. 17  See Annex.