- There was a modest pick-up in activity in the first quarter in the major industrial countries, largely the result of an improvement in net trade; domestic demand remained weak.
- Despite firmer oil and commodity prices, inflation remains at moderate levels among the major overseas economies, chiefly because the growth of earnings remains restrained.
- In the United States, trade volumes have begun to respond to the earlier fall in the dollar; the response of trade volumes in Japan and Germany has been only moderate in recent months. The large external imbalances persist.
- A number of major banks have increased their provisions against sovereign developing country debt in recent months.
- In the United Kingdom, output has responded to the growth of demand. The rise in manufacturing output has led to higher capacity utilisation and a deceleration in unit wage costs.
- Growth of domestic demand weakened in the first quarter; but consumer demand appears to have recovered in the second, and the prospects for an increase in manufacturing investment in 1987 are favourable.
- The deficit on non-oil trade improved in the first quarter as import volumes fell, reflecting an improvement in competitiveness. But there was a sharp rise in imports in May.
- Inflation remains at moderate levels; the strength of sterling in recent months has partly offset the impact of higher commodity prices. But the underlying increase in annual earnings has edged up and house prices continue to rise strongly.
Published on
01 September 1987
Economic commentary