Though output recovered quickly from the short-time working at the beginning of the year, the rise in the second quarter barely reversed the reduction in the first. Because of the weaker trend of demand, unemployment has increased; but shortages of materials and components, widespread at the turn of the year, to some extent persist. In other industrial countries, also, the rise in output has been very limited.
The balance of payments on current account remained in large deficit in the second quarter: at slightly over £1,000 million after seasonal adjustment it was about as big as in the first quarter. Good signs were that, while the trade deficit in oil increased, the non-oil balance again improved, both in volume and in value, and that the terms of trade ceased to worsen. Other industrial countries aside from Western Germany also incurred large deficits - though not as big as this country's. These, as here, were largely matched by capital inflows.
The rate of monetary expansion, though subject to largely fortuitous fluctuations, remained relatively restrained; and only a few of the banks, while continuing to lend to manufacturing industry on a substantial scale, ran into the penalty area under the supplementary deposits scheme. Companies may now be entering a period of increasing financial difficulty, stemming not from monetary restraint but from the limited prospects for profits.
Economic commentary