National output, which went up some 7 per cent in the course of 1963, seems likely to rise less than half as fast as this, by about 3 per cent, during 1964—in spite of a continued upsurge in fixed investment. Apart from the expected import increase, this slowingdown can be explained mainly by two things: the failure of exports to rise, and a large increase in consumer prices. Exports have actually been falling this year; the volume of exports of goods and services in the third quarter was just over 2 per cent lower than at the end of 1963 (table 1), and the value in October of exports of goods alone showed virtually no change from the third quarter average.

This note presents the results of a questionnaire enquiry into replacement policies used in a sample of firms, mainly in the engineering industry.

The enquiry was made as one part of a study of strategic factors in economic growth. This broader study has been focussed on the question : what factors influence the pace at which new and more efficient units of production, whether whole plants or individual machines, are introduced into industry in place of old ones, thus giving rise to increased productivity ?

This paper gives an account of a method of forecasting the Ministry of Labour's retail prices index, and of deriving from it a forecast of the consumer price index. (This is the index used in the National Income statistics to deflate the value of consumers' expenditure to volume terms.) Good forecasting obviously has to be based on a correct analysis of the factors which determine price changes; the article throws light on the way in which cost changes are taken into account when prices are changed. It seems that retail prices (apart from seasonal food prices) do not respond directly to short-term fluctuations in demand and output. Businessmen do not raise prices because demand suddenly rises; nor on the other hand do they lower them when output moves up sharply and unit costs fall. The analysis, therefore, provides further support for the ‘normal cost’ theory of pricing—that businessmen set prices by calculating their costs when working at some normal capacity, and add a conventional margin.