The growth of output in the main industrial countries has continued to exceed expectations. Prospects for growth next year also seem rather brighter now, even though activity in the United States has slowed sharply. Recovery continues in many of the non-oil developing countries and has spread further among the smaller industrial countries.
In the United Kingdom, output and demand appear to have been growing more slowly this year than last, even if allowance is made for the coal strike. The non-oil deficit has continued to rise, while manufacturing production has shown more sluggish growth.
Although the rise in output seems to have slowed, there has been little change in the underlying rate of earnings growth and labour costs per unit of output appear to have increased quite sharply, especially in manufacturing. The effect of this on UK competitiveness has been offset so far by sterling's depreciation, but at the cost of additional pressure on the price paid by industry for raw materials and fuel. Despite these cost pressures, retail prices have continued to rise at about 4½%-5%.
As real rates of return recovered fu rther, the company sector was in substantial financial surplus in the first half of the year and, more recently, companies have borrowed less fr om the banking system and rebuilt their bank deposits. In contrast, the personal sector increased the scale of its borrowing and added less to its bank and building society deposits in the third quarter.
Published on
01 December 1984
Economic commentary