The national accounts now published for the fourth quarter of 1969 confirm the estimate given in February's Review that output then was moving ahead a little faster, accelerating the recovery which had followed the first quarter's temporary drop in activity. Each of the three available GDP measures agrees in indicating this movement, although as usual, there is some difference as to the exact amount. As expected, the momentum of export growth slackened, but not by as much as anticipated; on the other hand imports proved to have risen quite strongly against our assumption of some fall and the level of investment proved rather lower than expected. However, perhaps the most important unexpected development indicated by the accounts for the fourth quarter of last year was the strong recovery of stockbuilding.

The latest figures confirm that industrial production in OECD countries increased by 7½ per cent last year, but they suggest that the rise in aggregate output was not far short of 5 per cent, which is rather above our February estimate.

A recent issue of the National Institute Economic Review contained an article in which errors in the National Institute's forecasts of the national income accounts were analysed. One of those who reviewed the article criticised it on the grounds that the author ‘does not make an assessment of the balance of payments forecasts, which really is like putting on Lear without the King’. On the strength of his own ‘fairly crude’ comparison between these forecasts of the balance of payments and the official estimates of what actually happened, he went on to suggest that the errors in the former in the ‘crucial’ years of 1960, 1967, and 1968 were ‘large enough to … make one doubt whether balance of payments forecasting, whether short- or medium-term, is really a possible or worthwhile exercise’. The present article, already planned when the earlier one appeared, is an attempt to fill the gap on the stage. It aims to provide a rather more refined basis for judging the worth of such forecasts, and perhaps at the same time to improve the prospect that some of the grosser errors of the past may be avoided in the future.

This note constitutes a second report on work undertaken at the National Institute to assist in the forecasting of exports. Some time ago, an article was published which explained how the regular forecasting of growth rates in real national product of industrial countries was used as a base for providing predictions of the value of trade in manufactures between these countries, and the share of United Kingdom exports to them. The present note describes how an attempt was made to supplement these predictions by a forecast for United Kingdom exports to primary producing countries.

‘The ideal situation would be one in which all the data were bang up to date, completely reliable and mutually consistent. We should then be able to say with confidence what had been happening and where we were. Unfortunately this is hardly ever possible. The first thing we have to forecast is the past.’

This article reports on some results obtained in the course of developing equations to explain, and predict, the behaviour of private manufacturing investment.

Apart from their analytical value, the estimation of formal relationships explaining investment provides a useful supplement for forecasting purposes to the information given by investment intentions surveys such as those carried out by the Board of Trade or the Confederation of British Industry; and for purposes of exploring variants of the main forecast, some formal investment relationships are of course indispensable.