Economic commentary

• Economic growth among the industrial countries rose in the second quarter, led by consumer spending.
• Consumer price inflation remains at a low level; the prospects are for a period of steady growth combined with low inflation.
• The stance of policy in the major countries remain cautious, although in Japan the discount rate was lowered to 3% at the end of October.
• Current account imbalances persist. US trade flows have been slow to respond to the fall in the dollar; the trade surpluses (in dollar terms) of Japan and Germany have widened, reflecting gains in their terms of trade.
• In the United Kingdom the growth of output strengthened in the third quarter.
• Consumer demand has continued to grow strongly, reflecting the growth of real incomes.
• The visible trade deficit widened in the third quarter, as the volume of non-oil imports rose. Sterling weakened and base rates were raised to 11 % in October.
• The growth of unit wage costs in manufacturing slowed in the third quarter as productivity rose. But there was little change in the growth of underlying earnings.
• The Chancellor reaffirmed the PSBR forecast for both fiscal 1986/87 and 1987/88 at 1¾ of GDR.

Economic commentary