Economic commentary

• Recovery in the major industrial countries has slowed, with reduced output growth in the United States in the first half of 1985 and some slackening of activity in Europe and Japan at the beginning of the year.
  
  
• Inflation has remained subdued in most major countries, as commodity prices have fallen further while unit labour costs in manufacturing have generally shown little or no growth.
  
  
• In the United Kingdom, activity was buoyant in the first half of the year as the effects of the coal strike unwound. Consumer spending picked up in the second quarter but industrial fixed investment fell back after an exceptional first quarter surge.
  
  
• Unit labour costs have been rising strongly but manufacturers' material and fuel costs have started to fall as sterling has strengthened, bringing an improvement in manufacturers' and retailers' profit margins.
  
  
• Retail prices have started to rise more slowly again and further slowing seems likely during the rest of the year and into 1986.
  
  
• Bank lending to industrial and commercial companies and to the personal sector remained buoyant in the second quarter; but the average size of building society mortgage taken out by first-time house-buyers appears to have fallen in the face of higher mortgage interest rates.

Economic commentary