Economic growth has been disappointing in the first half of 2003. The economy expanded by 0.1 per cent in the first quarter. Based on our monthly estimates of GDP we estimate that economic growth accelerated to around 0.4 per cent in the second quarter, remaining below trend. The weakness in the first quarter of the year came as a result of little growth in household consumption expenditure at a time when the corporate sector remained weak. We expect this pattern to have continued in the second quarter, although our forecast for growth in household consumption expenditure is not as weak as recorded at the beginning of the year. Our forecast of quarterly GDP growth (chart 1) shows the economy expanding more rapidly in the second half of the year. Growth in the second half of the year is supported by government investment and consumption expenditure, and a gradual recovery of growth in export volumes and business investment. Growth in export volumes is helped by the depreciation of the sterling effective exchange rate in the first half of this year, although there has been some rebound in the index over the summer. Conditions for business investment have also improved. Equity prices have risen in the second quarter of the year, monetary policy has been eased and the increase in geopolitical uncertainty that probably dampened investment in the first half of the year has subsided.