If you listen to analysts in the US and UK at the moment you will get the impression that the economies are heading for a boom, or a bust and some are trying to argue that both is in fact the case. Our statistics on manufacturing industry suggests that whilst there may be signs of an upturn in these two economies, they are still in decline in reality. The argument for a forthcoming boom and then bust, or "double dip" as one American economist described it, is that consumption has been artificially inflated by low interest rates and retail discounting and a second, more real recession is on the horizon.

There does not seem to be any real evidence for a false recovery in this case. To some extent you could argue that there was a false recession after September 11th and that consumer spending will soon revert to its long term recent growth, along with prices, wages and a stabalised job market. This may not require more than a marginal interest rate increase of up to 1% over the next 12 months to achieve this. As for manufacturing, there is a long run trend in place here that has been more spread out in the UK than the US. Expect to see a return to manufacturing output growth in the second half of 2002.