The outlook for world activity remains depressed and may, indeed, have worsened slightly in recent months with the further rises in oil prices . Payments imbalances have widened and are likely to persist for some time, so that recycling may be necessary on a scale comparable (in real terms) to 1974-75.
In the United Kingdom, the growth of consumer demand has slowed, reflecting the deceleration in real personal incomes which began in mid- I978. Other components of demand have also been subdued. With a strong exchange rate, and UK domestic costs moving further out of line with those of the other main industrial countries, the competitive position of industry has continued to deteriorate. This has been one factor behind the appreciable rise in import penetration, despite only modest expansion in domestic demand, and has also meant a loss of export market share. Output, in consequence, has been sluggish. GDP showed little or no growth during 1979, while the trend of manufacturing output alone, where competitive pressures are perhaps felt most keenly, may have turned downwards. (In the first quarter of this year, the steel strike will have reduced manufacturing output directly by around 2%, and overall by perhaps double this amount). Profitability has also suffered, and the worsening financial position of companies may well accentuate the reduction in stocks which is already in prospect.
Published on
01 March 1980
Economic commentary