Both the level of industrial production and its composition suffered large changes in the first half of 1980. The downturn that began in some industries after the second quarter of 1979 became a sharp and general fall in the second quarter of 1980. In 1979, pessimism began in the capital goods industries in the summer and spread to consumer industries in the autumn. For the year as a whole there was only a small change in output as the continuing growth in personal consumption balanced lower growth in industries dependent on exports or investment, particularly construction-related industries. At the beginning of this year, we expected a similar outturn in 1980: investment would fall sharply and exports grow slowly, but with consumption expected to rise at almost 3 per cent a year in 1980 and 1981 little change was expected in the level of output, although there would be a continuing shift towards consumer industries. Investment is falling, but up to now this has been concentrated in construction, both housing and industrial. Investment in machinery has held up, and much of the expected fall has been deferred into 1981, although it will then be more serious. But the sharp fall in consumer expenditure in the second quarter and the forecast that there will be little change in it for the next eighteen months mean that industries dependent on consumer demand are facing a much greater change from recent years than are more investment-orientated industries.

Over the last year we have been arguing that economic agents, be they households, companies or trades unions, try extremely hard to maintain their patterns of economic behaviour in the face of adverse conditions whether in the form of oil price rises, a world recession or governmental deflationary policies. Our output forecasts have therefore been somewhat less pessimistic than many others during the last year and actual outcomes have shown that, if anything, even we were too pessimistic for the period up to the second quarter of 1980 (chart 1). However, attempts to postpone adjustment can only last for a limited period especially if the economic conditions continue to worsen as they have done. It now appears that the resistance is beginning to crack and, as was pointed out in our last Review, the pressures fall most heavily on the non-financial company sector; hence the impact is reflected in rapidly rising unemployment and a steep fall in manufacturing output.

The growth of output in OECD member countries has been abruptly checked. Helped perhaps by relatively favourable weather, industrial production appears to have increased by 1-1½ per cent in the first quarter. In the second, however, there seems to have been quite a significant fall in Western Europe as well as in the United States, and a marked slowing down of growth in Japan (table 1). We no longer expect the aggregate rise for the year in member countries to be any more than ½ per cent (implying a drop of similar magnitude from the first quarter's rate), and the OECD secretariat has been forecasting a marginal fall. In terms of GDP the change of trend has been less pronounced but may well have been equally general. Though both we and OECD are expecting a rise of a little more than 1 per cent for the whole of 1980, some fall seems likely in the second half of the year.

During the last eight years there have been dramatic increases in the world price of oil. However, the incentive to use less energy comes from increases in the ‘real’ prices paid by consumers for fuel and the increases in these prices have been far smaller. This note examines the changes since 1973 in real prices for different fuels in different sectors in the UK and compares these price movements with those in some other Western developed countries.

This note outlines the principal results of an exhaustive study of Industrialisation and the Basis for Trade which will be published by Cambridge University Press later this year.

The relative decline of British industry has prompted some suggestions that Britain should model its planning and industrial policies on Japanese and French experience. This article considers the role of the Ministry of International Trade and Industry (MITI) in Japan and the Commissariat Général du Plan in France and examines the mechanisms through which planning and industrial policy have operated. It concludes with a discussion of the relevance of this experience for the UK where government policy appears to have been less successful.

After a brief description of the National Institute's approach to forecasting the price development of the major commodities in world trade this note presents a simple method for checking the aggregate outcome of that exercise.