The present economic expansion in the United States continues to appear firmly based. GDP rose by 0.9 per cent in the final quarter of last year, giving calendar year growth of 3.8 per cent, the best outturn since 1988. Industrial production rose by 5¾ per cent in 1997, helped by the rapid expansion of cross-border trade in North America. Recent developments in Asia are likely to have an important bearing on economic prospects this year, with signs that weaker external demand has begun to affect the tradable goods sector and offset some of the remaining cyclical strength in domestic demand. The present strength of the dollar along with the decline in energy prices is continuing to help to balance the cost pressures emerging from the domestic labour market and bring a further temporary decline in price inflation. Overall, we continue to expect growth to slow to between 2½–2¾ per cent this year, with inflation declining to 1½ per cent.