- After an exceptionally rapid increase, the growth of output in the United States slowed during the winter; activity in the major European countries quickened slightly in the second half of 1984.
- Lower commodity prices and modest earnings growth have helped contain inflation in most major countries.
- The expansion of world trade and of UK markets overseas, this year and next, is expected to be more modest than in 1984.
- In the United Kingdom, recovery from the coal strike, although not yet complete, has helped to sustain output growth since the winter. Even allowing for the changing impact of the strike, GDP appears to have risen by almost 3% in the year to the first quarter of 1985, with fixed investment particularly buoyant and a marked improvement since last autumn in net external trade.
- Unit wage costs have been rising more rapidly and, until recently, sterling's depreciation contributed to faster growth of materials and fuel costs. Import costs are now subsiding but a number of other factors have contributed to a rapid acceleration of retail prices, to 7% in the twelve months to May.
- Broad money has been rising appreciably faster than nominal income. Bank lending to the private sector, and to companies in particular, has continued to grow strongly in spite of still buoyant earnings and a continuing accumulation of liquid assets by the company sector as a whole.
- In the personal sector, consumption and investment have been subdued in recent quarters; borrowing has increased quite slowly and holdings of bank and building society deposits have grown strongly. Competition for the personal sector's savings has intensified.
Published on
01 June 1985
Economic commentary