The present prospects are for rather slow growth in world trade, but prospects will change if, and when, policies abroad become more expansionary. Domestic demand in this country has recovered from the set-back earlier in the year, but output is no higher than a year ago; and shortages, though persisting, have eased.
Despite comparatively stable import prices, domestic costs and prices have continued to increase fairly rapidly. This diverse trend is reflected in the terms of trade. The rise in export prices and stability of import prices have recently been the main influences in the continuation of the trend towards a reduced deficit this year in trade apart from oil.
The rise in commodity prices has greatly inflated the value of stocks and working capital. Company finances have also been adversely affected by other developments, including the working of price controls, and by the autumn, financial restraints were leading companies to prune investment plans. The measures taken in the Budget in November will alleviate this situation.
The tax relief granted to companies in the Budget will further enlarge the public sector borrowing requirement, which was already running at a rate of £5,500 million in the financial year. Since the beginning of the year the rate of monetary expansion has nevertheless remained moderate. The arrangements for the supplementary deposits scheme have been continued substantially unchanged for a further period to the middle of 1975.
Published on
01 December 1974
Economic commentary