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Chapter II. The Home Economy Forecast
Published online by Cambridge University Press: 26 March 2020
Extract
Three months ago we drew attention to the difficulty of interpreting the current economic indicators. Since then the situation has, if anything, become worse. The underlying trends in the economy would in any case have remained obscure because of the distortions caused by strikes, but in addition, the discrepancy between the three estimates of GDP became even greater in the third quarter of 1972 (chart 1). The change in output then as compared with a year earlier is given variously as minus 1/3, plus 2 1/4 or plus 3½ per cent, by the expenditure, income and output estimates respectively.
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References
page 34 note (1) In particular those of the miners in the first quarter and of the dockers and construction workers in the third.
page 34 note (1) Despite the construction workers' strike in the third quarter.
page 34 note (2) The CSO has suggested that the output estimate (currently the highest) is at present the most reliable. Using this (instead of the ‘compromise’ estimate) and again allocating most of the discrepancy (from expenditure GDP) to stock building we still find, for example, that the stock-output ratio falls to a very low figure. The implication is that a rebound of stockbuilding is to be expected whichever estimate is used (see page 43).
page 35 note (1) National Institute Economic Review no. 62, November 1972, pages 15-17.
page 36 note (1) In the case of VAT, with cuts in the rates of duty on drink and tobacco such as to leave the revenue from these items the same as it would have been under the present system.
page 36 note (1) Public Expenditure to 1976-77, Cmnd. 5178, HMSO.
page 37 note (1) See National Institute Economic Review no. 62, November 1972, pages 17-18.
page 38 note (1) The figures for contractors' new orders from the public sector (table 3) suggest however that these programmes are in the pipeline.
page 38 note (2) This is considerably larger than the financial year 1973/4 increase in the White Paper, because a very high figure is necessary in the first quarter of 1973 in order to approach the ‘outturn’ for 1972/3 given in the White Paper. In terms of financial years the increase in 1973/4 is still large, however,— 9.3 per cent.
page 38 note (1) Private dwellings investment does not appear to have been so strongly affected by the building strike as was the public sector.
page 38 note (2) CBI Industrial Trends Survey, January 1973.
page 40 note (1) See ‘The trade effects of EFTA and the EEC 1959-1967’; R. L. Major, ‘Note on Britain's share in world trade in manu factures’, National Institute Economic Review, no. 44, May 1968; R. L. Major and S. Hays, ‘Another look at the Common Market’, National Institute Economic Review, no. 54, Novem ber 1970; N. C. Garganas, ‘Forecasting exports to the Six: an analytical approach’, National Institute Economic Review, no. 60, May 1972; and, for a fuller discussion of tariff effects of EEC membership, chapter III of the review of the economic situation in National Institute Economic Review, no. 57, August 1971.
page 41 note (1) See page 35 above.
page 41 note (2) In terms of the DTI's unit value index based on 1961 weights. Commodity price prospects are discussed on page 77 below.
page 42 note (1) ‘The Programme for Controlling Inflation—The Second Stage’, Cmnd. 5205, HMSO.
page 42 note (2) See National Institute Economic Review, no. 60, May 1972, page 20; and no. 56, May 1971, pages 7-8 for our earlier calculations of the effect of cutting SET.
page 45 note (1) See National Institute Economic Review no. 62, November 1972, pages 27-28, where we suggested a £500 million deficit if the economy grew at 5 per cent through 1973.
page 45 note (2) i.e. the prices of those commodities for which the UK is likely to have a very low price elasticity. This means that we cannot expect the effect of these higher prices to be significantly offset by an effect on the volume of imports.
page 46 note (1) ‘Prospects for Economic Management 1972-76’, Depart ment of Applied Economics, University of Cambridge.