^{note (1) page 9} See Economic Trends, October 1969, page ix.

^{note (2) page 9} The effect assumed is indicated in footnote (a) to table 1. The residual difference between the compromise estimate of GDP and the expenditure estimate has been allocated to stockbuilding. This adjustment gives rise to stock accumulation figures which may seem rather high, especially for the second quarter, when the resurgence of exports associated with the ending of the American dock strike and the tightening impact of monetary measures might have been expected to deflate the level of stocks rather more severely. However, it may be noted that both the low growth in output and the strong resurgence of imports are indications of pressures in the opposite direction. Furthermore, it may be the case that part of the stock accumulation registered then is the counter part of delays in payment for investment goods. And stock accumulation probably fell off again in the ensuing (third) quarter.

^{note (1) page 11} The public sector estimates are now based on expenditure figures and show a fall of 8 per cent, whereas the Ministry of Public Building and Works output series gives a rise; and in the private sector there is a similar discrepancy associated with the seasonal adjustment factors, the output figures showing a steady level against the sharp fall recorded in the national accounts data. There was also a surprisingly sharp jump in the price deflator for the dwellings (and other buildings) series.

^{note (1) page 12} The figures given in table 2 have been smoothed to allow for the investment grant switchround effect. The amounts assumed are indicated in footnote (c); for manufacturing investment our assumed switchround effect of £40 million compares with the Board of Trade's figure of £30 million.

^{note (1) page 13} i.e. smoothed for the ‘switchround ‘effect. But we insert the qualification ‘apparently’ because the Board of Trade's 10 per cent might be thought to apply to the forecast recorded (i.e. unsmoothed) figures for 1969. If that were the case, there would be no substantial disagreement between our selves and the Board of Trade as our forecast growth would, on the basis of recorded figures, work out at nearly 8½ per cent and this could be regarded as falling within the range of error of a 10 per cent central estimate.

^{note (2) page 13} In particular, as regards the tapering off.

^{note (3) page 13} But see note ⁽¹⁾ above.

^{note (4) page 13} The latest Gas and Electricity Council Annual Reports, for example, indicate reappraisals and trimming down of expenditure plans.

^{note (5) page 13} In terms of growth, as distinct from levels. The latter are of course clearly affected by the discovery of under-recording, the new figures being presented on a ‘true’ basis.

^{note (6) page 13} See below, pages 18.

^{note (7) page 13} The drop in the net new orders figures for July can probably be heavily discounted as a statistical quirk (see the Board of Trade Journal, 29 October 1969, page 1172).

^{note (1) page 14} The full assumed effects of German revaluation are dis cussed in some detail on pages 38-39 below. For 1970, we have inflated the export forecast on this account by some £25 million at current prices.

^{note (2) page 14} Thus hourly wage rates in the nine months from Decem ber 1968 to September 1969 have risen at an annual rate of about 2 3/4 per cent, compared with a decade (1958-1968) annual average of around 5 per cent; and, again, in the first nine months of this year the number of workers obtaining increases in wage rates was only just over 4 million compared with a decade annual average of 10¼ million. It is known on the other hand that a number of large increases, recently negotiated, will be coming into effect in the last quarter of 1969, and the forecast effectively assumes a return to ‘average’ behaviour over the prediction period from now on.

^{note (3) page 14} The example considered starts with a postulated ceteris paribus (‘ex ante ‘) change in the relationship of the wage and salary rise to GDP. The quoted figure for the extra consumption is the end result of this change in relationship, after taking account of the fact that the extra consumption would add to GDP (after appropriate deductions for imports and indirect taxes) and that this rise in GDP would in fact add further to the postulated extra rise in wages and salaries.

^{note (1) page 15} The estimates then given of the ‘first round’ impact of the budget on consumers' expenditure, with figures in £ million, 1963 prices, and starting with the second quarter of 1969, ran as follows : 1969 II, −11; 1969 III, −17; 1969 IV, −16; 1970 I, −22; 1970 II, −28; 1970 III, −38; 1970 IV, —45. See National Institute Economic Review no. 48, May 1969, pages 6-8.

^{note (2) page 15} The monetary effects referred to are those we have been able easily to measure, and relate to (weighted) changes in bank advances and hire purchase debt (summed as the ‘credit effect’ in table 4). No doubt the squeeze has had other relevant effects also; the absence of a stock exchange boom for example contrasts sharply with the situation existing this time last year.

^{note (1) page 16} No estimate has been put, in table 1, on the speculative effects, in 1970, associated with anticipation of the removal of the scheme. Such an estimate has, however, been included in the balance of payments table (table 5).

^{note (1) page 17} A further decline in the numbers unemployed (seasonally adjusted) occurred in November.

^{note (2) page 17} The latter fell from £33 million in the first quarter to £15 million in the second, and then to only about £3 million in the third quarter—so accounting for just over 20 per cent of the total improvement over the three quarters. With their virtual cessation now, the presentation of table 5 has been revised to incorporate past payments on this account. The forecast assumes negligible payments in 1970.

^{note (3) page 17} The repayment obligations on the German loans are of course now higher in sterling terms to the extent of the deutschmark revaluation.

^{note (4) page 17} The amount of under-recording has been put by the Board of Trade at £35 million in each of the first two quarters of this year. This—together with other net revisions of -£3 million in the first two quarters—accounts for £67 million of the total discrepancy of £150 million. This leaves £83 million to be explained. As our previous forecast for the third quarter's visible trade was made on the notional basis that under- recording had not been discovered, it seems fair to deduct £35 million again from the £83 million remaining discrepancy to give £48 million as an estimate of the ‘true’ forecast error.

^{note (1) page 18} However, during the course of 1970, and probably in the second quarter, substantial payments may be incurred for expenditure on Boeing civilian aircraft. An estimate of these is included in table 5, but excluded from table 1 (ibid., note (b)).

^{note (2) page 18} The Board of Trade has suggested that due to quicker filing of returns, and the filing of documents relating to previous periods, the trade returns for the third quarter included an amount of £17 million of net over-recording. To the extent that this effect may have been underestimated, the suggested forecast error will have been exaggerated. Some further comments on the Board of Trade's figuring for the earlier period appear below (pages 22-23).

^{note (1) page 19} There was little reason to expect to be able to ‘forecast’ these revisions. A study of revisions to the quarterly net invisible balance using the figures for the period 1963 IV-1969 II does indicate that the early rounds of revision are on the whole in an upwards direction, and on these grounds some net upward revision to the 1967 and 1968 figures might have been expected. But this would have been to back very small mean upwards revisions against a very large variety of individual experience (as indicated in the study by high standard deviations around the mean revisions—the ratio of the former to the latter being typically in the range of 4 to 6 times).

^{note (2) page 19} The £100 million allows rather more for ‘permanent’ savings than for a temporary fall in imports in the autumn due to anticipation of the removal of the scheme.

^{note (3) page 19} The prospect of rising export and falling import prices implies quite a strongly favourable ‘terms of trade’ effect. From the third quarter of the year to the last quarter of 1970, the favourable movement of the terms of trade implied is about 4 per cent at annual rates—an arithmetical’ gain’ of around £290 million to the trade account. (The year-on-year movement in the terms of trade is much less favourable than this, however.) The true economic benefit from this trend in the terms of trade is, however, much harder to assess, since a good part of the prospective improvement is due to our view that world trade will not increase so fast next year as this—and this in turn depresses the relative rate of growth of exports.

^{note (1) page 20} See, for example, the description of that outcome in Economic Trends, June 1969, as ‘exceptionally high’ (Ibid. page x).

^{note (2) page 20} As suggested in the August Review (pages 14-15). The illustrative numbers quoted there in fact correspond fairly closely to the data now available.

^{note (3) page 20} This includes the speculative run-down of imports associated with anticipation of the ending of the scheme as well as the ‘permanent’ effect; but it excludes the benefits to the short-term capital account which accrue from the scheme. These may amount to as much as £200 million.

^{note (4) page 20} See National Institute Economic Review no. 45, August 1968.

^{note (5) page 20} At higher rates of growth it would in principle become increasingly necessary to take account of the fact that some exports might be directed to home consumption.

^{note (1) page 23} The term ‘net’ is used because the inquiry into under- recording uncovered valuation errors which amounted to a gross over-recording of 1 per cent. The 3 per cent gross under-recording is deducted from this to give the net 2 per cent figure.

^{note (2) page 23} The only other comparably sharp decline in share during the 1958-68 period was in 1967 which was, of course, affected by the dock strike.