Prior to the terrorist attacks of 11 September 2001, activity in the United Kingdom had already slowed since mid-2000, reflecting soft external demand and a drop in business investment. However, the deceleration was less steep than in the United States and in the euro area. Put in a broader historical perspective, a striking feature of the ongoing cycle is its limited amplitude, notwithstanding a series of shocks including surging oil prices, weakening overseas demand and, domestically, wet weather, rail disruptions and a severe foot-and-mouth disease. Another prominent feature, not unlike in the United States, is the contrast between the momentum of consumption and the external drag, reflecting at least partly a strong exchange rate. This pattern is the mirror image of the one witnessed in the mid-1990s. Also very different from that period are the low level of unemployment and the degree of entrenchment of low inflation. Looking ahead, uncertainties have risen sharply following the terrorist attack in the United States and activity is likely to weaken further in the near term. However, as long as the present uncertainties dissipate, and helped by the monetary and fiscal stimulus currently underway, growth should recover by the middle of next year, unless the imbalances in the economy unwind abruptly.