Economic recovery was checked during the summer and unemployment began to rise again both in North America and in Western Europe. The setback seems, however, to have been due to a large extent to stock movements and will probably prove temporary. We expect total real output in the OECD area to increase by about 52 per cent this year and by 4 1/2–5 per cent in 1977. In 1978 it seems likely that growth will be a good deal slower, notably in the United States. Our preliminary forecast is 3–4 per cent.

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.

The general climate of opinion about the likely course of the world economy over the next two or three years has altered considerably during the last few months. Around the middle of the year it was not infrequently suggested that the very rapid rise in output in the first quarter was the prelude to a coming boom which would cause governments to slam on the brakes some time next year and thus produce a new recession in 1978. Anxieties about 1978 still persist, but since the extent of the slowing down in the growth of world output in the second quarter became apparent the basis of these anxieties has changed. The fear now is that the recovery may peter out without gaining sufficient momentum to generate the revival of business investment on which its continuation beyond 1977 largely depends.

The 1975 reduction of energy consumption was chiefly due to the recession; plans and forecasts for 1975-80 indicate a return towards pre-1973 energy usage and the upward trend becomes moderated only in 1980-85. Europe's relative dependence on imported oil is likely to decline, due to increased production of North Sea oil and of nuclear electricity, as well as to the better utilization of other indigenous sources, though there are some uncertainties about these. Beyond 1985, however, new energy sources are likely to be needed; in order to secure them in time, R & D effort ought to be strengthened now, and on a cooperative international basis.

This article examines the accuracy of the National Institute's forecasts of incomes, inflation and employment from 1965 to 1975. It is found that in recent years the Institute has tended to underestimate inflation, although less seriously for the consumer price index than the other current price variables studied. The accuracy of the forecasts has generally increased in relative terms, although it has deteriorated in absolute terms. The forecasting performance in 1974 was particularly poor but there has been a distinct improvement in 1975 and 1976.

British wage costs per hour, including social charges, had—by 1974—become the lowest among the fifteen industrial countries included in the comparison in this note; this competitive advantage of British industry was however partly or entirely offset by lower labour productivity. Hourly earnings in money terms were not rising outstandingly rapidly in Britain in this period, but since consumer prices increased faster, the improvement in real earnings was slower than in most other countries.

This article examines the problem of unemployment among school leavers. It is shown that although the summer peak in such unemployment has reached record levels in recent years this remains a largely temporary phenomenon. However, longer term unemployment among school leavers is now becoming a serious problem. Though the Government's present measures will relieve the problem somewhat they provide a temporary palliative rather than a longer term solution.