The UK economy has continued to strengthen in the first half of 1994, with provisional figures suggesting that output in the second quarter of the year was over 3¼ per cent higher than a year before. With the economy now experiencing stronger growth than at any time since 1988 there are increasing signs that the recovery has become more broadly based, although utilisation of labour and capital in the economy as a whole remains below ‘normal’ levels. At present it appears likely that growth will continue above trend levels over the next 12 to 18 months, with the economy benefitting both from an improvement in the wider world economy and, at least until the middle of next year, from the sizable change in the stance of monetary policy since the end of 1992.