The dividing line in recent economic trends came in the middle of 1960 when the short sharp burst of expansion in the British economy stopped. Since then, there has been little further growth. There was no increase in real demand in the second half of 1960, a rise in the first half of 1961, and a downturn in the second half. It is too early to say for certain how big this last fall was; but—allowing for seasonality—it probably left demand and output at the end of 1961 less than 1 per cent higher than they had been eighteen months earlier (table 1 and chart 1).

This chapter uses, in addition to published figures, information obtained in the Institute's Industrial Inquiry in November and December 1961. The chapter gives, first, a general survey of trends in production, employment and productivity in 1961. It then considers whether capacity and labour supplies are adequate for the rise in demand which is likely, on present policies, this year. Finally, it gives a short account of developments in individual industries in 1961, and comments on their prospects this year.

This chapter first describes the internal developments during 1961 in the major industrial countries overseas. It then discusses conditions in the primary producing countries, trends in world trade in manufactures (including British exports) and concludes with a discussion of changes in the pattern of the balance of payments between major countries and areas.

This chapter discusses the prospects for internal economic activity in the major industrial countries, for commodity prices and for the international balance of payments. It concludes with a discussion of prospects for British exports and the balance of payments.

The conclusion of the previous analysis is that output at the end of the year may be about 12 per cent higher than in mid-1961, and that fixed capital expenditure will probably have begun to fall. Although the check to home demand should hold down imports, and although external conditions are expected to be unusually favourable to British exports, the balance of payments is unlikely to be good.