Chapter II. The Home Economy

Extract

Our general assessment of the prospects for the economy over the next two years has not changed greatly since we reported last November. There have been further sharp increases in oil prices, which lead us to raise the forecast increases of the OPEC average oil price to 60 per cent for 1980 and 20 per cent for 1981 (as against 36 per cent and 15 per cent respectively in November). And this year there has been the steel strike. These events, and other adjustments suggest that the various objectives of economic policy, such as economic growth and the reduction of inflation and unemployment will be missed by a somewhat larger margin. Ironically the balance of payments will be improved in the short run because the effect of the strengthening of the pound reduces the deficit initially (the inverse of the J curve effect which occurs when the pound falls).