House prices, after several years of increasingly more moderate rises, began to post small declines in some market indicators as from the second quarter of this year, while housing starts fell by almost half. This abrupt change in scenario, together with the tightening of financing conditions, which I shall address in greater detail later, meant that real estate companies had to restructure, with some of them even going bankrupt. This series of factors compounded the correction of the residential sector with adverse consequences for employment, which is acting as the main channel through which the adjustment of the sector is spreading to the rest of the economy. Household consumption is rapidly reflecting the deterioration in confidence, against a backdrop of considerable financial tensions, and the abrupt turnaround in the employment situation. As a result, a certain rise in the saving rate consistent with the current scenario of greater uncertainty and financing difficulties might be taking place. I should stress that this far-reaching slowdown in private consumption is the factor that is most contributing to the loss of dynamism in the economy. Business investment also slowed rapidly, in line with the changing financial conditions, the profile of domestic demand and the deterioration in business confidence. Nonetheless, exports are sustaining a relatively high growth rate, despite worsening world trade so far this year, and they are providing some support to investment in equipment.
This weakness is consistent with survey indicators of 9  For example, Guiso, L, Sapienza, P and Zingales, L (2013), 'Time Varying Risk', NBER Working Paper 19284. Guiso et al use a survey of Italian investors and find that the proportion of individuals unwilling to take any financial risk had increased from 18% in 2007 to 42% in 2009 and put this down to emotional response (fear) triggered by a scary experience. 10 See Nagel, S and Malmendier, U (2011) ' Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?, Quarterly Journal of Economics, Vol126(1), pp373-416. Kunreuther, H., R. Ginsberg, L. Miller, P. Sagi, P. Slovic, B. Borkan, and N. Katz (1978). Disaster Insurance Protection: Public Policy Lessons. Wiley Interscience. Bernile, G., Bhagwat, V., & Rau, P. R. (2017) 'What doesn’t kill you will only make you more risk-loving: Early-life disasters and CEO behavior', The Journal of Finance, Vol.72(1), pp167-206. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  investment intentions which remain subdued and elevated uncertainty, as detailed in the February 2017 Inflation Report. 11  By the end of the forecast, the level of business investment is around 20% lower than in the Monetary Policy Committee's May 2016 forecast. Our latest estimate of year-on-year business investment growth in the fourth quarter of 2016 is already around six percentage points weaker than our projection in May.