- The recovery among the major industrial countries from the pause in growth at the beginning of 1986 continued at a moderate rate in the third quarter.
- Inflation has continued to decline among the major overseas economies. However, in the fourth quarter spot oil prices rose to over $18 per barrel.
- Current account imbalances persist, with only slight adjustment so far of us trade volumes to the substantial decline in the dollar.
- A further weakening of the US dollar around the turn of the year contributed to a realignment of EMS currencies in mid-January. Later in the month there was a cut in official interest rates in Germany.
- In the United Kingdom, the rate of economic growth strengthened in the third quarter, according to the output measure of GDP.
- There was a steady increase in the growth of domestic demand during 1986, led by consumer spending, reflecting a further rise in real personal disposable income.
- Manufacturing output has risen further, partly reflecting a strong cyclical increase in productivity. Associated with this, the growth of unit wage costs slowed: in the three months ended November they were 3% higher than a year earlier.
- The deficit on current account narrowed in the fourth quarter of 1986, and the increase in non-oil export volumes exceeded that of imports. Recent survey evidence indicates manufacturing firms are more optimistic about export prospects.
Published on
01 March 1987
Economic commentary