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Chapter I. The Home Economy

Published online by Cambridge University Press:  26 March 2020

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Extract

The picture of the development of the economy which we present here differs substantially from that which we gave three months ago. This is for two reasons. In the first place, in August, at the time we were writing: ‘The recovery in UK output is clearly under way, against a background of a world recovery more rapid than we previously anticipated’, in fact output had stopped rising. GDP in the second quarter actually fell and our present estimate for the third quarter is now no higher than for the first. Whereas in August we thought that GDP growth through 1976, i.e. from the fourth quarter of 1975 to the fourth quarter of 1976, would be 4.8 per cent, we now have a figure of only 2.3 per cent. This pause in recovery has not been confined to Britain: it has happened in many industrial countries, including the United States, Germany and Japan. The question is whether the recovery will resume after the pause, or will be aborted. We are in fact assuming for the world economy a resumption of growth though at a somewhat slower rate than we forecast before for 1977.

Type
Articles
Information
National Institute Economic Review , Volume 78 , November 1976 , pp. 6 - 20
Copyright
Copyright © 1976 National Institute of Economic and Social Research

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References

(1) As often happens, the latest trade figures for October are slightly at odds with our forecast for this quarter, largely on import volume. This may well be a timing discrepancy, particularly as both cars and certain semi-manufactures (within the fastest-growing categories) have been subject to constant import control rumours.

(1) See A. J. H. Dean, ‘Earnings in the public and private sectors 1950-1975’, National Institute Economic Review, no. 74, November 1975.

(1) See Department of Employment Gazette, December 1975, pp. 1258-63.

(1) The sum of the weights used to find the average change in other currencies is not equal to 1 and the relative change in a country's rate is found as the difference between percentage changes not the ratio of two indices. We discovered these facts too late in August to make the appropriate allowances in our forecast.

(2) The method is explained in R. R. Rhomberg, ‘Indices of Effective Exchange Rates’, IMF Staff Papers, XXIII, 1 (March 1976), pp. 88-112, and the series is published monthly in IMF, International Financial Statistics.

(1) A projection in February 1975, using similar methods but constant prices and exchange rates (National Institute Economic Review, no. 71, p. 58), found figures of 50 and 45 per cent for 1977 and 1978, only falling below 30 per cent by 1980.