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The Economic Situation: Annual Review: Chapter I. The British Economy: 1966 to Mid-1968

Published online by Cambridge University Press:  26 March 2020

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Extract

The main statistical propositions about the British economy in 1966—on the movement of output, employment, the balance of payments and prices—are these. National output fell through the year. It is difficult to disentangle its exact course in the two middle quarters because of the seamen's strike. By the last quarter national output had probably fallen something like 1½ per cent from its level in the first quarter, so that in the year 1966 as a whole it was about 1 per cent higher than in 1965. Unemployment was slow to start rising : it did not turn up until May. Thereafter it went up sharply, reaching 1.9 per cent (wholly unemployed, seasonally adjusted) in December. The balance of payments trade deficit, which in 1965 was about half that of 1964, roughly halved again in 1966 : but there was still a deficit—taking current and long-term capital items together— probably of the order of £150 million. So by the end of 1966 the accumulated current and long-term capital deficit for the three years 1964-66 totalled some £1,130 million. Retail prices during the year rose 3.8 per cent; tax changes accounted for about 1½ per cent of this, and in the second half of the year, from June to December, the rise was only 0.7 per cent if tax changes and seasonal fuel and food price changes are excluded. Hourly wage-rates, which in the year to July 1966 had risen 6½ per cent, thereafter levelled off completely. The wholesale price index for manufactured goods was also only fractionally higher in December than in July, and the export price index also levelled off (although here the change-round in non-ferrous metal prices explains some of the flattening) (chart 1).

Type
Research Article
Information
National Institute Economic Review , Volume 39 , February 1967 , pp. 4 - 13
Copyright
Copyright © 1967 National Institute of Economic and Social Research

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References

note (1) page 4 Including a normal balancing item, and excluding the IMF subscription.

note (2) page 4 From the fourth quarter of 1965 to the fourth quarter of 1966.

note (1) page 5 See National Institute Economic Review No. 37, August 1966, page 6.

note (2) page 5 See Economic Calendar, page 81, for details.

note (3) page 5 See Economic Calendar, page 81, for details.

note (1) page 6 The recorded figures for public investment show a rather misleading hump in the second and third quarters; the rise was probably in fact spaced out over a much longer period (page 37).

note (2) page 6 See National Institute Economic Review No. 38, November 1966, page 4.

note (3) page 6 It is true that an additional 1 per cent increase in wage-rates would probably lead to something less than a 1 per cent increase in retail prices. On the other hand, whereas the rise in wage-rates serves to increase the wage and salary bill only, the rise in prices serves to decrease the real value of all other personal incomes—such as pensions and other current grants—as well.

note (1) page 8 The figures in table 1 for the volume of exports of goods and services have been adjusted for the assumed delays in Customs clearance.

note (2) page 8 Hansard, Thursday, 16th February, 1967. Written answers, col. 165-7.

note (3) page 8 This calculation is made after smoothing the past figures for public investment published in the national accounts (page 37).

note (1) page 9 Vote on Account, 1967-68, HMSO, 15.2.1967.

note (1) page 10 The index of hourly wage-rates is an index of basic rates. In the period from the beginning of 1966 to the middle of 1968, the engineers are due to receive in all a 16 per cent increase in their basic rates; this is sufficient alone to raise the total hourly wage-rates index by 3 per cent over this period. However, most of this increase is supposed only to apply to the lowest-paid workers; we have assumed that it does this, and that consequently the effect on earnings is much smaller. It is mainly because engineering earnings are assumed to rise much less than engineering wage-rates that total earnings in this period have been forecast as rising more slowly than total hourly wage-rates.

note (2) page 10 The movement of car sales has quite a marked effect on the index of consumer prices : see page 38.

note (3) page 10 See Appendix II, page 74, for details.

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