The principle of simultaneously freezing both incomes and prices has an immediate appeal, as being fair. However, it can only be a temporary device; if it were continued—in an effective way—for more than a few months, it would be bound to break down.

The problem of forming a reasonably firm view of developments so far this year in real output and demand has become no easier to solve during the three months since we last reported. In addition to registering the distorting effects of the miners' strike in the first quarter and the American dock strike late last year, the three measures of GDP most recently published for the first half of 1972 are showing a wider discrepancy amongst themselves than at any time in at least the last eleven years. For the third quarter as well, two of the indicators which we normally use in making our estimates of the national accounts aggregates in the most recent period—the trade figures and the index of industrial production—have both been affected (the trade figures especially) by strikes, in the docks and in the building industry. Finally, with the publication of the 1972 Blue Book have come revisions to the data which were available in August—affecting in particular the preceding four quarters.

Output in the industrial countries has been rising rather faster than we supposed in August, and our expectations for next year are correspondingly higher also. It now looks as though real economic growth in the OECD area will be about 5½ per cent in 1972 and at least 6 per cent in 1973.

The National Institute Economic Review has from time to time published articles on the medium-term prospects for certain sectors of the economy—notably cars and other consumer durables, paper and board, and energy.(1) In ti is issue we begin an appraisal of the most recent forecasts for the paper and energy sectors together with an extension of the forecasts up to 1980. It is hoped to publish similar articles on cars and other consumer durables, together with some general assessment, in May 1973.

The demand for and supply of paper and board were studied in an article published in 1965 in the Review which surveyed past trends and contained forecasts for 1970 and also for 1975. The present article carries forward the analysis of trends, compares the previous forecast with the actual outcome for 1970, reassesses the prospects for 1975, and extends the forecast period to 1980.

When we last made a medium-term energy forecast, in 1967, we said that it was ‘highly speculative to express any view about the division of …. energy demand between primary fuels and in particular about the demand for coal’ because of two factors: the emergence of natural gas and the degree of protection given to coal. Meanwhile natural gas has been adopted on a substantial scale—it already accounted (in terms of coal equivalent) for about 5 per cent of the supply of primary energy in 1970—and significant deposits of petroleum have been discovered in the North Sea. The flow of oil from this source seems sure to have begun by 1975, and by 1980 a large part of crude oil requirements will be covered by ‘domestic’ supplies, though the quantity available remains uncertain. Social considerations apart, this could throw a different light also on the question of protecting coal. Moreover the EEC might well be operating a common energy policy by the end of the decade and in the meanwhile there are in our view a number of other aspects of present United Kingdom energy policy which in any case call for re-examination. Thus our present forecasts are no less speculative than the earlier ones, though for rather different reasons.

The level of unemployment has recently risen to a level not previously experienced during the post-war period. Most of the increase has happened in two fairly sharp movements, the first in 1966-7 and the second in 1970-1. A measure of the scale of the problem is given by the following comparison: in early 1966 the number of wholly unemployed males in Great Britain stood at a little over 200,000; and by the end of 1971 the figure had risen to over 700,000. (See chart 1, where unemployment is on an inverted scale.)