Final sales have been rising relatively fast since the beginning of the year, but for a time the effect on the level of output has apparently been offset by reduced stock accumulation. Now, output is probably starting to rise again and it seems likely to continue to increase. The only substantial adjustment to the broad predictions for overall demand made in the January issue of the Review is that prospects for consumers' expenditure now suggest bigger increases than were then expected. It is unlikely that the economy as a whole will be running at the limits of capacity in the rest of this year, but there may be increasing strains in some sectors. The central problem of policy is likely still to be the discouraging outlook for the balance of payments.

The Review has now been appearing for more than two years; this article looks critically at our attempts at forecasting. Forecasting is not the Review's only purpose; it aims to provide a regular and systematic analysis of recent economic developments, which allows readers to form their own views of the future. Our forecasts provide one view for them to consider.

Aid from industrial countries (that is, grants and long-term public and private investment) now makes a significant contribution to the economies of underdeveloped countries. From 1956 to 1959, these countries received, on average, $6½ billion a year. This yearly inflow was equal to about a third of their income from merchandise exports to the rest of the world, or something approaching two-thirds of their total stock of gold and foreign exchange reserves; it is very much bigger than it was in the post-war years up to 1952—when it was probably not more than $2 billion a year.

In recent years, a steadily increasing proportion of the import bill has been made up by goods which compete more or less directly with the output of British manufacturing industry. Table 1 gives an indication of the growing significance of these imports. They are divided into two major groups. The first includes manufactures for further industrial processing, including chemicals, iron and steel, paper and board and partly-finished textile manufactures. Non-ferrous metals have been excluded, because the proportion of consumption satisfied by British industry is relatively limited. The second group consists of imports of finished manufactures, including engineering products, vehicles, clothing and many miscellaneous manufactures.

In this issue, the quarterly figures for exports and imports of primary producing countries given in the Statistical Appendix (tables 24 and 25) are seasonally adjusted. Table 1 shows the seasonal corrections applied, and gives some measure of their reliability. Seasonal adjustments were also calculated for a number of series not given in the Economic Review—notably for some primary producing countries' exports of certain commodities, such as cocoa and wool (table 1, part II). Chart 1 shows the adjusted and unadjusted lines for the total exports of the overseas sterling area, and also for some of the other series where the seasonal fluctuations are most marked.