In major overseas countries, recent announcements of budgetary and monetary plans suggest little change from the anti-inflationary stance adopted over recent years. These policies have helped reduce average inflation to rates not seen for over a decade (although the downward movement may now be losing momentum).
Inflation continues to vary between countries, and similarly there has been a diverse pattern of economic recovery. Where inflation has been brought down to low levels economic growth has generally been resumed, but where inflation remains a considerable problem (as in some parts of Europe) the recession has not yet clearly come to an end.
In the United Kingdom latest indications are that the recovery in activity which began some three years ago is continuing at a moderate pace, with few signs of a re-emergence of inflationary pressure. Until recently, the output response from domestic industry has been rather slow, but it may now be quickening somewhat. The rapid rise in output per head also seems to be continuing, especially in manufacturing. Partly for that reason, the trend in unemployment has not improved as much as might have been expected.
Faster growth in demand at home than abroad worsened the balance of trade (apart from oil) last year, but this situation may now be changing. Exports, having been rather sluggish in the previous twelve months, contributed most to demand in the fourth quarter. Even so, the recovery continues to rely quite heavily on consumer spending, much of it financed by borrowing. The pattern of recovery so far has brought a marked improvement in th efinan cia I position of industrial companies. Borrowing by the public sector increased for a time last year, but its subsequent deceleration and the large funding programme helped moderate the growth in the monetary aggregates over the last six months.
Economic commentary