https://cpes.org.uk/om/files/original/c1e29ea2f9c0caf1773331a299c12608.pdf c2a040bc8762b07a14ea4d20950143f3 Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Prospects for Economic Management 1973 - 77 Text A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text. Text Any textual data included in the document PROSPECTS FOR ECONOMIC MANAGEMENT 1973-77 STATISTICAL APPENDIX Cambridge Economic Policy Group Statistical Appendix Estimates of expenditure, output, employment, balance of payments and prices for 1960-77 Contents Tables: 1. GDP, employment and unemployment 2. Public expenditure 3. Gross fixed capital formation 4. Stockbuilding 5. Balance of payments 6. Actual balance of trade, 1960-73 7. Disaggregated imports - ·.ctual 1960-73 8. Trend balance of trade, 1960-77 9·. Par balance of trade, 1960-77 10. World trade and relative costs, 1960-77 11. Projected balance of trade, 1973-77 12. Projected imports \vith 2% per year GDP growth, 1973-77 13. Actual expenditure on GDP 14. Par expenditure on GDP, 1960-77 15. Retail prices 16. Real national income and consumption Notes and definitions The notes and tables ~n this Appendix were prepared by Martin Fetherston in consultation with other members of the Cambridge Economic Policy Group. The computer analysis necessary to produce the tables was carried out by means of programs written by him. The actual computations were carried out using facilities provided by the University of Cambridge Computing Service. Table 1 GDP, Employment and Unemployment Year y u U' 1960 3~776 356 295 1961 33631 286 .324 1962 33974 347 439 1963 35300 536 422 1964 37354 379 309 1965 38424 300 283 1966 39108 273 372 1967 39836 454 498 1968 '41504 534 525 1969 42146 522 538 1970 42788 553 594 1971 43344 630 749 1972 44286 865 748 1973 46900 664 470 Growth ratea 7.9dCJ.-6 3.2 ... Z965-9 Z989-?S 2.3 2.? ... G.D.P. 1rowth at 2% Eer ~ear 1974 47838 446 481 1975 48776 508 575 1976 49761 627 665 1977 50746 694 769 GroUJth rate 1.973-? 2.0 ... G.D.P. Growth at 1% E·r zear 1914 47369 446 555 1975 47838 670 718 1976 48307 769 881 1977 48823 1002 1049 GztODJtlz ztate 1.973-? z..o ... E 23774 24167 24257 24110 24475 24782 24949 24546 24392 24377 24299 23922 23633 24222 0.8 -o.4 -o.2 24787 24341 24438 24137 -o.z 24787 23886 24202 23214 -z..z E' 24116 24223 24186 24375 24747 24889 24728 24461 24381 24336 24100 23775 23975 24726 E* 2)1.28 23559 23691 23823 23956 24090 24110 24130 24151 24171 24222 24274 24325 24377 Y* 30908 31945 33018 34126 35271 36455 37709 39007 40350 41739 42773 43832 44917 46031 P* l 319 l 356 l. 394 1.432 1 472 1.513 1 564 1.616 1.671 1. 727 1.766 1.806 1.846 1,888 0.6 -o.e 0.4 24535 24396 24267 24137 0 6 3..4 o.z 3.4 0 2 2.5 Par growth ' 24224 47043 24314 48561 24404 50131 : 2452 7 51829 2,8 3.4 2.3 1.942 1.997 2.05,4 2.113 -o.e 0 2 3.0 2.8 24352 24038 23726 23438 -l.J Table 2 Public Expenditure Year CG IDG IKG IG G 1960 7352 393 2077 2470 9822 1961 7618 411 2267 2678 10296 1962 7859 466 2306 2772 10631 1963 7984 479 2390 2869 10853 1964 8118 630 2710 3340 11458 1965 8396 663 2813 3476 11872 1966 8606 750 2972 3722 12328 1967 9097 848 3368 4216 13313 1968 9190 894 3~30 4224 13414 1969 8976 890 3109 3999 12975 1970 9095 801 3298 4099 13194 1971 9430 750 3341 4091 13521 1972 9786 688 3253 3941 13727 1973 10060 725 3265 3990 14050 Growth rates l960-5 2.? Z.965-9 l . 7 l969-?3 2.9 u.o ?. 6 -5,.0 6.2 ?, l 2.5 3,6 l.2 -O,l 3o 9 2.2 2.0 1974 10287 686 3093 3779 14066 1975 10585 587 3188 3775 14360 1976 10870 547 3240 3787 14657 1977 11168 540 3308 3848 15016 Growth rate l973-7 2.6 -?.l 0,3 -0.9 l. ? Table 3 Gross Fixed Capital Formation Year IG IDP IKP I Y IDP* IKP* I* Y* 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 2470 26 78 2772 2869 3340 306 3722 4216 422L, 3999 4099 4091 3941 3990 679 689 678 679 813 817 765 801 846 758 702 831 983 1162 2594 3013 2894 2903 3351 3.514 3556 3881 4285 4347 4458 4750 5743 6380 6344 6451 7504 7807 8043 8564 8951 9042 9223 9269 9382 9902 32776 33631 33974 35300 37354 38424 39108 39 836 41504 42146 42788 43344 44286 46900 572 632 646 601 697 692 662 733 741 818 796 794 868 1112 2383 25 75 2684 2796 3057 3078 3278 3412 3771 4116 4459 4424 4603 4751 5425 5885 6102 6266 7094 7246 7662 8361 8736 8933 9354 9309 9411 9854 30908 31945 33018 34126 35271 36455 37709 39007 40350 41739 42773 43832 44917 46031 Growth rates l960-5 ?. l 3.8 6.3 3.9 5.2 6.0 l965-9 3.6 -l.9 5. l .7.....7 2.3 4.2 ?. 5 5.4 l969-?3 -0. l ll.3 2.6 2,7 8.0 3.6 2.5 2.5 GDP grmV"th at 4% per year 1974 3779 899 5338 1975 3775 899 5380 I 1976 3787 921 5544 1977 3848 943 5716 10017 10054 10251 10507 4?838 48776 49761 50746 1011 983 1034 1086 5047 5299 5612 5894 9836 10057 10433 10828 47043 48561 50131 51829 Growth rate l9?3-? -0.9 -5. l 4. ? l.5 2.0 -0.6 5,5 2.4 3.0 GDP ~rowth at 1% p~E_year~ 1974 3779 899 5301 1975 3775 876 5216 1976 3787 874 5296 1977 3848 871 5379 9979 9867 9957 10098 47369 ~78j8 48307 48823 Growth rate l973-7 -0.9 -?.0 3.2 z0 · Table 4 Stockbuilding Year s H H/Y S* H*. H*/Y* 1960 733 13150 40.1 371 12247 39.6 1961 3S2 13502 40.2 383 12630 39.5 1962 11 13513 39.8 395 13025 39.4 1963 197 13710 38.8 407 13432 39.4 1964 936 14646 39. 2· 420 13852 39.3 1965 602 15248 39.7 433 14285 39.2 1966 414 15662 40.0 459 14744 39.1 1967 338 16000 40.2 474 15217 39.0 1968 471 16471 39.7 489 15706 . 38.9 1969 419 16890 40.1 505 16211 38.8 1970 257 17147 40.1 365 16576 38.8 1971 -7 17140 39.5 373 16948 38.7 1972 -412 16728 37.8 381 17329 38.6 1973 880 17608 37.5 390 17720 38.5 Growth rates L960-5 L965-9 ...L969-?3 3.0 -0.2 2.6 0.2 L. 0 -L.6 3. L -0.2 3.2 -0.2 2.2 -0.2 GDP growth at.2% per year 1974 786 18394 38.4 1975 358 18752 38.4 1976 326 19078 38.3 1977 333 19410 .38. 2 Par growth 349 18069 542 18611 559.· 19170 605 19775 38.4 38.3 38.2 38.2 Gl'OWth rate 'l973-7 2.5 0.5 ~, GDP growth at 1% per year 1974 643 18251 38.5 1975 171 18422 38.5 1976 124 18546 38.4 1977 141 18686 38.3 2.8 -0.2 Growth rate Z9?3-? Jl.5 0.5 -·------ Table 5 Balance of Payments. 1960 - 77 Year BT{1) PIA GT {a) (b) (c) total To EEC Other PT B 1960 1961 1962 1963 1964 1965 1966 1967 196l:J 1969 1970 1971 1972 1973 -407 -147 -101 -137 -602 -300 -101 -463 -385 172 383 775 -109 -1721 - -233 233 - -254 254 - -334 334 - -398 398 - -393 393 --435 435 - -387 387 -379 - 379 - -335 335 - -499 499 - -515 515 - -516 516 - -456 456 -744 -39 705 - -94 13 -255 - -118 17 6 - -121 10 122 - -132 -5 124 - -163 -10 -382 - -177 -7 -49 - -180 -22 84 - -188 -44 -316 - -179 1"55 -284 - -177 -49 445 - -172 -34 692 - -200 -30 1061 - -189 -!5 83 -85 -247 -110 -1458 1974 -3612 885 -2~ -160 697 -81 -274 -129 -3399 1975 -2328 974 -83 ..,.351 540 -150 -295 -149 -2382 1976 -1070 1101 -187 -537 377 -216 -325 -172. -1406 1977 -210 1227 -298 -664 265 -298 -358 -202 -803. Longterm Investment Overseas (net) Trade Credit (net) Capital Trans- fers -197 62 106 -150 -342 -182 -70 -46 27 -33 -82 319 -173 -47 -32 -[>4 -89 -46 -46 -204 -180 -246 -172 -244 -95 -109 - - - - -- - 223 -105 -60 56 -250 -150 112 -350 - 98 -400 - 70 -450 - BB Overseas D currency borrowing by UK banks to finance loans to UK public sector -499 - 36 - - - 164 - - -ll5 - 20 -770 - - -277 - - --190 356 --542 169 --503 -196 -240 85 -366 488 -1285 -293 --199 769 -1400 1000 237 -3743 1300 - -2620 1450 - -1708 1550 - -1183 1600 ~ Net.; liquidity ~ffec~ -499 36 164 -95 -770 -277 166 -373 -699 ·325 854 992 .<.570 -163 ·-2433 -1170 -158 417 Ditto, cumu1ative -499 -463 -299 -394 -ll64 -1441 -1275' -1648 -2347 -2022 -1168 -176. 394 231 -2202 -3372 -3530 -3113 ( 1) Assuming GDP growth of 2% per year after 1973 (a) Before allowing for interest and profits on overseas investment in North Sea oil (· (b)) and interest on higher borrowing to finance deficits. 1973-77 (· (c)) · Table 6 Actual Balance of Trade, 1960-73 Year XM PX PM 1960 1961 1962 1963 1964 1965 1966 196 7 1968 !969 1970 1971 1972 19 73 7014 7225 7345 7649 7951 8336 8679 8782 9807 10719 11255 12057 12432 13495 Gr?w+."fz r~tgH 1960-5 3 5 Z96.5-9 6.E 7_ 969-7 3 5.9 739.9 7346 7487 7761 8480 8561 8780 9371 10058 10355 10872 ll398 12556 13730 3.0 4,9 7,3 0.734 0.743 0.749 0' 759 0.770 0,787 0.811 0,825 0,898 0,919 1,000 L048 1,072 L211 L4 3,Q ?,2 0.751 0.751 0.748 0.766 o. 793 0.801 0.814 0,823 0,913 0,935 1,000 1.040 1.070 L316 Z:.3 3.9 8,9 TT 0,978 0,990 1,001 0.991 0.971 0.982 0.997 1.003 0.983 0.983 1.000 L007 1.002 0.921 O,l 0 -l, 6 X' 5147 5368 5503 5809 6119 6561 7043 7245 8802 9850 11255 12632 13331 16347 5.0 lO. 7 l3.5 M' 5554 5515 5604 5946 6721 6861 7144 7708 9187 9678 10872 11857 13440 18068 4.3 9.0 l6,9 BT -407 -147 -101 -137 -602 -300 -101 -463 ,..385 172 383 775 -109 -1721 - Table ., Disaggregated Imports - Actual 1960-73 Year FDT 1960 1969 1961 1969 1962 2047 1963 2008 1964 2047 1965 2008 1966 1969 1967 2047 1968 2106 1969 2028 1970 2047 1971 2047 1972 2088 1973 2103 Growth rates Z960-5 0.4 Z966-9 0.2 Z969-?3 0.9 PFDT o. 782 0.754 0.766 0.835 0.865 0.851 0.869 0.861 0.902 0.952 1.000 1.064 1.130 1.476 Z.? 2.8 U.6 FU 449 468 524 557 . 599 655 720 772 819 87.g 945 1030 1030 1089 7.8 7.6 5.5 PFU BM 1.069 1325 1.030 1238 ·1.017 1189 1.002 1251 0.975 133 7 0.930 1325 0.868 1263 0.944 · 1251 1.101 1374 1.032 1337 1.000 1362 1.213 1239 1.208 1267 1.559 1451 -2.8 2.6 Z0.9 0.0 0.2 2, z FM 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 674 ·.'714 771 '820 1026 1087 1209 1432 1567 1704 2050 2374 2868 3690 Growth rates Z960-5 ZO.O Z965-9 ZZ.9 Z.969-7J 2Z..3 PFM 0.767 o. 779 o. 780 0.795 0.816 0.811 o. 819 0.839 0.962 0.967 1.000 1.023 1.090 1. 244 z. z. 4.5 6.5 sv PSV 1606 1621 1616. 1649 1708 1755 1803 1838 1826 1996 1958 2066 2197 1915 0.580 0.622 0.632 0.619 0.635 . 0.667 0.686 o. 711 0.790 0.790 1.000 1.040 L097 1.283 Z.B 2.8 3.3 4.3 -z.o Z2.9 AC 0 0 0 0 2 10 33 81 100 57 10 5 5 0 PBM 0.815 0-815 o. 778 o, 791 0.837 0,837 0.840 0-809 0.878 0.937 1,000 1.027 L046 1,360 PAC ......... .... 1.000 1v200 L242 1.210 1.090 L070 1,000 LOOO 1.000 SF PSF 1376 0. 730 1336 0.730 1340 0. 713 1476 o. 711 1761 0.752 1721 o. 797 1783 0.830 1950 0.820 2266 0. 935 2354 0.978 2500 1.000 2637 0.977 3101 0.958 St.82 1.219 ;.;...__......;;;...~,;;._-- 4,6 l.B ___ __B.l zo .3 5.3 5_.: ,7 7399 7346 7487 7761 8480 8561 8780 9371 10058 10355 10872 11398 12556 13730 PM 0.751 0.751 0.748 0.766 0. 793 0.801 0.814 0.823 0.913 0.935 1.000 1,040 1.070 L316 3.0 Z..3 4.9 3.9 7.3 8.9 Table 8 Trend Balance of Trade, 1960-77 Year X M PX PM 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 6038 6474 6742 7121 7432 8005 8548 8855 9502 10177 10731 12005 12707 13392 14397 15421 16530 17642 6959 6944 7251 7469 7936 8040 8392 9123 9706 10225 10867 11585 12824 13325 14406 15405 16574 17938 0.545 0.569 0.605 0.648 0.685 0.740 0.799 0.859 0.906 0.942 1.017 1.064 1.'081 1.157 1.235 1.303 1. 375 1.452 0.524 0.545 0.590 0.648 0.690 0.749 o. 796 0.870 0.918 0.940 1.002 1.067 1.099 1. 254 1.451 1.476 1.513 1.573 Growth rates l-960-5 5.8 2.9 6.3 ?.4 l-965-9 6.2 6.2 6.2 5.8 l-969-73 ?.Z 6.8 5.3 7.5 l-973-7 7.7. 7. 7 5.8 5.8 TT 1.040 1.044 1.025 1.000 0.993 0.989 L004 0.987 0.,986 1,003 1.015 0.998 0,983 0.923 0.851 0.883 0.909 0.923 .. X' .3293 3682 4079 4614 5093 5925 6832 7606 8604 9588 10915 12777 13735 15500 17774 20095 22734 25609 ' M' 3649 3784 4278 4840 5479 6018 6681 7939 8913 9608 10891 12356 14097 16705 20900 22743 25080 28209 BT -356 -102 -199 -226 -386 -93 151 -333 -309 -20 24 421 - 362 -1205 -3126 -2649 -2346 -2599 -"L.O 0.3 -2.0 ·a l-2,5 l2o8 l-2.8 l-3.4 W.5 l-2.4 "£4.8 l-4.0 Table 9 Par Balance of Trade, 1960-77 Year X* 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 19 73 1974 1975 1976 1977 6709 6677 7096 7493 8016 8145 8370 9249 9832 10153 10694 11620 13103 14185 15738 16693 17748 19237 Growth rates ZB60-5 4.0 ZB65-9 5.7 ZB69-?3 8.? Z9?3-? ?.9 M* 6959 6944 7251 7469 7936 8040 8392 9123 9706 10225 10867 H585 12824 13325 14406 15405 16574 17938 2.9 6.2 6.8 ?.? PX* 0,552 0,586 0,620 0.661 0.696 0.748 0.804 0.860 0.879 0.927 1.021 L067 L 131 1.214 1.289 1.334 1. 398 1.506 PM* 0.532 0.563 0.607 0.663 0 c 703 0.758 0,802 0.872 0,89: 0,920 1.005 L070 1.156 1,330 e 1.533 1.523 1.545 1.643 6.3 ?.3 5.5 5.0 ?.0 9.6 5,5 5,4 TT* 1.037 1 040 1,022 0,997 0.990 0.987 1.003 0.986 0,987 1,007 l .016 0,997 0.979 0,913 0.841 o,876 0.905 0,917 X'* 3}01 3911 4401 4953 5578 6092 6728 7951 864 7 9407 10919 12396 14819 17219 20281 22265 248i.l 28965 M'* 3701 3911 4401 4953 5578 6092 6728 7951 8647 9407 10919 12396 14819 17719 22081 23465 25611 29465 BT* 0 0 0 0 0 0 0 0 0 0 0 0 0 -500 -1800 -1200 -800 -500 -Z,O 0.5 -2.4 o,z W,5 ll., 5 Z6,3 Z3,9 W.5 ZL5 Z7.2 l3,6 Table 10 World Trade and Relative Costs, 1960-77 Year w w... uc RD RX RC ... RC .RC* 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 38712 40094 42380 45427 50449 54157 59359 62813 70426 78098 85417 90532 97707 110281 34850 38046 41535 45344 49502 54041 58997 64407 70314 76762 83801 91486 99876 109035 0.704 0.727 0. 734 0.741 0. 7.70 0.783 0.814 o.eas 0.866 0.909 1.000 1.097 1.181 1. 296 0.889 0.906 o. 889 0.883 0.903 0.907 ~. 932 0.913 0.959 0.965 1.000 1.046 1.080 1.093 1.179 1.174 1.182 1.179 1.176 1.173 1.178 1.148 1.009 1.011 1.000 1.000 0.959 0. 883 1.049 1.064 1.051 1.041 1.061 1.068 1.098 1.048 0.967 0.976 1.000 1.047 1.036 0.965 1.109 1.099 1.089 1.079 1.070 1.060 1.050 1.041 1.031 1.022 1.013 1.003 0.994 0.985 1.040 1.040 1.040 1.04· 1.040 l .040 1.040 1.040 1.100 1.050 1.000 1.000 0.900 0.900 Grou.;t7c J'ates l-960-5 ?.0 9.2 2.2 0.4 0 0.4 -0.9 l-965-9 9.6 9.2 3.8 Z.6 -3.8 -2.2 -0.9 l-969-73 9.0 9.2 9.3 3. 2 -3.3 -0.3 -0.9 nYAssumed in projections (table 1974 119034 119034 1.421 1.093 1975 129950 129950 1.557 1.093 1976 141867 141867 1.706 1.093 1977 154877 154877 1. 870 1.093 0.837 0.837 0.837 0.837 0.915 0.915 0.915 :J.915 0.976 0.967 0.959 0.950 0 0.2 -3.8 0.900 0. 930 0. 930 0.880 Growth rate l-9?3-'1? 8.9 9.2 9.6 0 -z. 3 -z. 3 -0.9 -0.6 Table 11 Projected balance of trade, 1973-77 ~~~-......-,..- Year X M PX G D,P,c ~rowth at 3%~er ~ear 1973 13495 13730 L211 1974 14805 15058 1,360 1975 16118 16083 L472 19?6 17423 17276 1c588 1977 18644 18574 L714 ~~~~- ---=---~~~~~-~~ Growth r>ate ?Y?3~? 8,4 ?, 8 9, z ~.,.,-.......c.r.....__.-.,.~--=--""-~-=-'=-~~~--~~~ g:.,p,;.,~~~E£~!=.!!~!!.,.,~!"J2~r ~eat: 1973 13495 13730 L211 1974 14805 14812 1,360 1975 16118 15524 1o472 1976 li423 16352 1 588 19n 18644 17231 L714 ~..-_-,._.-,..,.--,~~-''""'"-..:-- G'l"owth rate Z9?3-7 8, 4 5,8 z9., -~=---.-------- -=--~~-,-- --G. D.P ~· ~QWth at 1% per_xear -- - - 1973 13495 13130 L211 1974 14805 14571 lo360 1975 16118 15014 L472 1976 17423 15514 1.588 1977 18644 16058 L 714 ~-,-__.---=~-~-~ Growth rate Z9?3~7 80 4 4u0 9o Z PM L3l6 L601 L675 L753 1o86l 9o Z L316 1.603 1678 L757 1.867 9o Z L316 lo605 L682 L762 L872 9o2 TT Oo92l Oo849 0,879 Oo906 Oo921 0 Oa921 0.,848 Oo877 Oo904 0,918 -Ou Z Oo921 Oo847 Oo875 Oo901 Oo916 -Do Z X& 16347 20132 23729 27668 31955 ZBu2 16347 20132 23729 27668 31955 Z8c2 16347 20132 23729 27668 31955 ZBo 2 M~ 18068 24108 26939 30286 34576 l?, 6 18068 23744 26057 28738 32165 l5u5 18068 23317 25250 27330 30052 Z3o6 BT -1721 -3976 =3210 -2618 -2621 .....:-,........,~ -1721 ~3612 =2328 -1070 =210 -1721 -3255 =1521 338 1903 Table 12 Projected imports with 2% per year GoDoPo growth, 1973~77 Year FDT PFDT FU PFU 1973 1974 1975 H76 1977 2103 2103 2103 2103 2103 L476 L717 L821 1 982 2cl59 1089 1074 906 740 571 1,,559 3o348 3o595 3,861 4,150 GPowth rate ?9?3=? 0 lCuO ~l4 .. 9 2?,? c=-"-"',=-~-~-=-cc~--~-~:.-o:=c~-~ Year FM PFM -~---~-~-~~~~~.= 1973 3690 1,244 19 74 1975 4292 4818 lo396 1 512 1976 5419 1,625 1977 6049 L 746 -~-~-~~-=-~-=--=-=~- ~--~~~ Growth rate L.973=? Z-3o 2 Bo9 sv PSV -"""'~ 1915 L283 2134 lo445 2179 1 o610 2225 1.794 2271 2,000 ~-=~ 4o 4 Uo? BM PBM 1451 1414 1410 1405 139~ ~ lo360 1. 0 5.22 ·L567 L611 lo738 ·~Zo 0 6oD M 13730 14812 15524 16352 17231 PM L316 L603 L678 1,757 L867 5o 8 9o '£ SF 3482 3793 4108 4460 4841 8n6 PSF L219 lo400 L452 lo492 1 595 ?o 0 · Table 13 Actual Expenditure on G.D.P. Year c CG I 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 25136 25723 26269 27416 28274 28708 29258 29841 30556 30638 31404 3221.1 34115 35600 7352 7618 7859 7984 8118 8396 8606 9097 9190 8976 9095 9436.> 9786 10060 5743 6380 6344 6451 7504 7807 8043 8564 8951 9042 9223 9269 9382 9902 Growth rates l960-5 2.7 l965-9 l.6 l969-?J 3. 8 63 3.? 2.3 G.D.P. Growth at 2% per year 1974 36015 10287 10017 1975 36693 10585 10054 1976 36801 10870 10251 1977 36956 11168 10507 Growth rate l9?3-7 0.9 2.6 l.5 G.D.P. Growth at 1% per year 1974 35277 10287 9979 1975 35181 10585 9867 1976 34266 10870 9957 1977 33438 11168 10098 Growth rate Z9?3-7 -l.6 2.6 0.5 s 733 352 11 197 936 602 414 338 471 419 257 -7 -412 880 786 358 326 333 643 171 124 141 X 7014 7225 7345 7649 7951 8336 8679 8782 9807 10719 11255 12057 12432 13495 M 7399 7346 7487 7761 8480 8561 8780 9371 10058 10355 10872 11398 12556 13730 A 6104 6203 6225 6482 6798 6821 6939 7130 7282 7283 7574 7894 8403 8981 R 301 -118 -142 -154 -151 -43 -173 -285 -131 -10 0 -324 -58 -326 y 32776 33631 33974 35300 37354 38424 39108 39836 41504 42146 42788 43344 44286 46900 3.5 3. 0 2.2 6.5 4.9 l.6 5.9 ?.3 5.4 3.2 2.3 2.7 14805 16118 17423 18644 14812 15524 16352 17231 9018 9248 9281 9336 -243 -260 -277 -294 47838 48776 49761 50746 8.4 5.8 l.O 2.0 ll+805 16113 17423 18644 14571 15014 15514 16058 8808 8809 8542 8315 -243 -260 -277 -294 47369 47838 48307 48823 8.4 4.0 -l.9 l. 0 Table 14 Par Expenditure on GDPj 1960-77 Year 1960 ; 96:. 1962 1963 :. 96<, - ~;6:· "966 '967 968 1969 '970 197;: g.nc ·. 973 ~974 1975 1976 1977 C* CG I* S* X* M* A* R Y* 23052 7352 5425 371 6709 6959 5342 301 30908 24090 7618 5885 383 6677 6944 5646 -118 31945 24781 7859 6102 395 7096 7251 5822 -142 33018 25640 7984 6266 407 7493 7469 6041 -154 34126 2:.7·73 8:.18 709l. 420 8016 7936 6063 -151 35271 2656:;1 8396 7246 433 8145 8040 6252 -43 36455 27772 8606 7662 459 8370 8392 6595 -173 37709 2"850 909 j 8361 474 9249 9123 6615 -285 39007 288C8 9t90 8736 489 9832 9706 6868 -131 40350 30854 8976 8933 505 10153 10225 7446 -10 41739 3191.2 9095 9354 365 10694 10867 7780 0 42773 3319.., 9430 9309 373 ll620 11585 8188 -324 43832 33336 9786 9411 381 13103 12824 8219 -58 44917 33437 :~0060 9854 390 14185 13325 8244 -326 46031 33854 10287 9836 349 15738 14406 8374 -243 47043 35072 10585 10057 542 16693 15405 8723 -260 48561 36545 10870 10433 559 17748 16574 9174 -277 50131 37763 11168 10828 605 19237 17938 9541 -294 51829 Gro,yt:h Pate& 7960-5 2.9 L965-9 3o 8 Z969-73 2.0 l9?3-? Jo Z 2,7 l '7 2.9 2.6 6.0 5. 4 2.5 00~ 2.4 4,0 5.7 8.? ?.9 2,9 3,2 6.2 4.5 6.8 2,6 7,? 3. ? 3,4 3.4 2.5 3,0 Table 15 Retail Prices Year RPI TC WC PGM RPI* TC* WC* PGM* 1960 1961 1962 1962 ::.964 1965 :'..966 1967 1968 :'..969 1970 1971 1972 1973 67.2 70,0 ]2.5 /3,9 76 3 80,0 83-1 85,2 89;2 94-0 100.0 109.,4 117.2 128.2 52,-7 55,0 57 . 3 55, 9 60 2 66.8 73ol 76.3 84-,, 6 95.3 100,0 99.7 96.5 98, 7 72.9 76.2 77.8 79,1 8LO 83.7 86.9 87.1 89 . 8 91,5 100,0 113 . .3 124.4 ~ 34 '9 79.5 78,1 77.8 8Ll 83,8 83.8 84,9 84.8 93.3 96.6 100.0 104,4 107.3 133.8 54.0 56.9 6L 7 65.6 69,7 75.1 80.1 85.7 91.2 97.4 103,9 1110 2 117.6 123.3 54.7 57,6 60,6 63.8 67.2 70.8 74.5 78.5 82-6 87.0 9L6 96.5 101.6 106.9 58.0 61.6 65,5 69,5 73.9 78.5 83.3 88.5 94.0 99.9 106.1 112.7 119.7 127.2 61.8 65.0 68.4 72,0 75.8 79.7 83.9 88.3 92.9 97.8 -102.9 108.2 113.9 119.9 Growr:.h rates l960-5 '< c; t,... ,.., 4.8 2.8 l. l 6. 8 5. 3 6.2 5.2 Z-965-9 4. l 9.3 2,3 3.6 6,? 5.3 6.2 5.2 l969-13 8. l 0.9 W.2 8. 5 6. l 5.3 6.2 5. 2 GDP growth at 2% per year -;_g:4 146.8 113.0 147.9 1975 162.1 124.8 162.1 1976 175,2 134.9 177,6 1977 190.2 146.4 194.7 163.9 170.3 177 0 4 187.5 131.3 139.8 148.9 158.6 112.6 118.6 124.9 131.5 135.1 143.5 152.4 161.9 126.1 132.7 139.7 147.0 Growth rate l9?3-? W.4 W.4 9.6 8.8 6. 5 5. 3 6.2 5. 2 Table 16 Real National Income and Consumption indices, 1970 actual =lOO Year 1965 1966 1967 1968 1969 1970 1971 1972 1973 Growth rates l965-9 l-969-73 Projected 1974 1975 1976 1977 Growth rate l-973-7 Actual RNI c 89,5 91.2 92,9 96,1 98,0 lOO 0 101 3 103.2 106. 7 9L4 93c2 95 0 97,3 97' 6 lOO 0 102 6 108.6 113.4 .. Par run c 85.1 88 3 90,9 94 0 97-6 lOO 2 102 1 104.1 104.4 84,6 88. 4 88 7 9L 7 98,2 101,6 105 7 106,2 106.5 2,3 Z, 6 2. z 3 8 3 4 3, ? z7 20 RNI 104,6 106.4 108,0 109.2 1% c ll2, 3 112 .. 0 109.1 106,5 G,D.P. growth at 2% run c RNI 105.6 ll4. 7 106.7 108.4 ll6.8 110.7 llL1 117,2 114.7 113.5 ll7' 7 118,2 3% c ll7. 1 122.0 125.9 130 2 Par RlH 103,4 107 9 112.3 116-2 c 107' 8 llL7 ll6., 4 120.2 -z.0.6 6 Z, 5 0,9 2,6 3.4 2 7 3.0 Notes and definitions Introduction The following sections describe in detail the methods used to construct Tables l-16o The figures in the tables excluding TablesS and 16 are calculated by means of a set of computer programs which are designed to produce a mutually consistent set of tables for any given set of relevant assumptions about the future" The general method involves the follm.,ring three stages: 1) Construction of the par economy for the past, ioeo the economy as it could have been if demand had been continually adjusted so as to maintain a constant rate of unemployment~ nnd if UK producers had been sufficiently competitive in foreign trade to ensure that specified balance of payments targets were being meto This is achieved by the application of a precise set of rules (described below) to actual past datao Hhere possible published data is used for this purpose: estimates based on latest available information are used for 1973 data as yet unavailable a 2) Projection of the par economy for the future on the basis of certain precise assumptions about underlying trends in the development of the economyo 3) Projections of the actual economy using, in reverse, the same rules as in l)o Alternative projections shown in the tables are based on alternative assumptions about future GoDoPo ·- 1% and 2% growth in general~ with, in addition, 3% growth for projection of the balance of trade in Table. 11" Additional alternative projections can rusobe produced by varying the assumptions made about world trade and relative costs in Table 10~ the assumptions made for the trade projections are described further under Tables 6-12. Steps 1) and 2) construct a picture of underlying trends in the development of the economy~ and are thus invariant to the choice of projections made under 3)o In the definitions which follow~ all expenditure i terns are in £million at 1970 prices except where otherwise specifiedo The growth rates shmvn in the tables are average compound growth rates per annumo Table 1 GDP, Employment and Unemployment The relationships used for this table analyse ~ast movements in GDP, employment, unemployment and productivity in order to construct par series for those variables, i.e. how they might have behaved if a constant pressure of demand (defined as a 2i% rate of unemployment) had been maintained throughout. Then the par economy for the future is constructed by projecting par employment and par productivity~ and the same framework of relationships used to investigate the consequences for the actual economy of any given pattern of growth of future actual GDP. Definitions: y GDP (£ million) at 1970 factor cost: compromise index linked to 1970 expenditure estimate u Unemployment: arithmetic mean of first quarter seasonally adjusted monthly figures (excluding school-leavers and adult students) (thousands) E Employment: employees in employment plus HM forces plus employers and self-employed (self-employed based on 1971 Census of Population); seasonally adjusted March figure on Census of Employment basis. 1' 2 (thousands) Actual employment and unemployment~ E and U~ are then adjusted for their lagged response to changes in output to obtain equilibrium employment and unemployment, E' and U'~ which, at a particular pressure of demandp are the levels of actual employment and unemployment which could be sustained if that demand pressure persisted} witlr a given labour force; U' is thus a direct measure of the current pressure of demand. The speed with which U and E adjust to U' and E' respectively depends on the rate of growth of output: the faster the rate of growth, the slower the rate of adjustment. 1 Earlier figures on National Insurance Card count basis are converted to the new series at June 1971 (the first Census of Employment estimate). 2 There is some doubt about the validity of the erratic movements in quarterly female employment (DE Gazette May 73, p. 459); we have interpolated the quarterly movements to revise estimates of female employment in 1971 I (+70~000) and 1972 I (-120,000). Thus we have next year's actual unemployment as a weighted sum of this year's actual and equilibrium unemployment (and similarly for employment): ut+l = !. At U' t + (1 - -1 ) At ut Et+l = .!_ At E' t + 1 (1 -- ) At Et Ll 1.2 For the past we can thus infer U' and EI: -U' t At ut+l + (1 - At ) ut E' t "" At Et+l + (1 - At) Et 1.3 1.4 The speed of adjustment. is given by ly - y \ I \ - 0.4 + 8.3333: \ t-ll \ t-1 1.5 so that A varies from 0.4 with zero growth to 0.9 with 6% growth. Par series for GDP~ unemployment, employment and productivity~ i.e. Y"', U"'~ E~ and P*~ are then obtained from relationships between their respective deviations from par: E' ( Y \,Be i* - l'·. -Y*). 1.6 U' - U* · 0.4(E"' - E1 ) 1.7 U"' · 0.025 E"' 1.8 where Se increases smoothly from 0.52 in 1960 to 0.76 in 1972, and is assumed to remain constant thereafter, implying increased responsiveness of employment, and thus alae unemploymentp to fluctuations in GDP. Par productivity (E thousand,. 1970 prices) is defined by P"' · Y"'/E"' 1.9 1.3 to 1.9 are solved to obtain values of E"' for 196lp 1965» 1969 and 1972, and of P"' for 1961~ 1965, 1969 and 1973. Other past values are obtained by interpolation or extrapolation. E"' is extrapolated to 1977 taking account of demographic changes, etc., and P"' is projected on the basis of a study of productivity trends in the manufacturing and non-manufacturing sectors. 1.9 is then used to obtain a series for Y* for the entire period 1960-77. For any one of the alternative projections of actual GDP, 1.3 to 1.8 are solved to give future equilibrium and actual employment and unemployment. Table 2 Public Expenditure Definitions: CG Public authorities' current expenditure on goods and services IDG Public sector gross fixed capital formation in dwellings IKG Other public sector arose fixed capital formatio~ IG Total public sector gross fixed capital formation IG · IDG + IKG G Total public sector expenditure on goods and services (excluding public corporations' current expenditure) G · IG + CG The volume of resources absorbed by the public sector in the categories defined above h assumed to be the same. under par as uncler actual conditions, and also under any of the alternative projections of the future pressure of demand. Thus no adjustments for pressure of demand, etc., are made to the public expenditure aeries. Projec.tions for 1974 onwards are based on estimates in the White Paper "Public Expenditure to 1977/78" adjusted to talc.8 account of the es·timated effecte of· the cuts announced by the Chancellor on December 17th, 1973. Table. 3 Gross Fixed Capital Formation Using the estimates of par GDP obtained in Table 1, par series for various components of capital formation are constructed and projected given these par projections, actual series are then projected to correspond with the alternative projections of GDP shown in Table 1. Definitions: IDP Private gross fixed capital formation in dwellings IKP Other private gross fixed capital formation IG Public sector gross fixed capital formation (see Table 2) I Total public and private gross fixed capital formation I = IDP + IKP + IG Par series for past years are calculated by IDP* = IDP + 0.05 (Y* - Y)_1 - HN IKP* ~ IKP + 0.08 (Y* - Y) + 0.19 (Y* - Y)_1 - 0.1 (Y* - Y)_ 2 3.1 3.2 Since values of Y* prior to 1960 have not been constructed, IDP* in 1960 and IKP* for 1960 and 1961 are obtained by extrapolating backwards a geometric trend fitted to the par series given by 3.1 and 3.2. MN is an adjustment term to account for the effects on private housebuilding of abnormal financial conditions in the housing market, and is given by the equation: MN ; 0.29 (NI - NI*)_1 - 74.6 (MIR- MIR*) where 3.3 NI = annual net inflow Qf funds to building societies (1970 prices) MIR = current borrowing rate on new mortgages NI* = 11par" net inflow~ 1..e. that inflow received by the building societies when the ratio of their deposit rate to Bank rate/Minimum Lending Rate is eq~al to unity MIR* = trend value of MIR The presence in the par series, as well as the actual, of the 1973 house- buildinc boom ans the fall in non-dwelling fixed investment in 1971 indicate that these events cannot be fully explained by movements of actual GDP or, in the case of housebuilding, by UUllSually favourable financial conditions. Assumin; that 1973 housebuildin& contains an unexplained abnormal positive com,onent of some £200 million, future par housebuilding is pro- jected on the basis that £70 million of this abnormality persists into 1974, but none thereafter. This adjustment is superimposed on an under- lying par series which accelerates from a growth rate of 3.2% in 1974 to 5% by the end of the period. Future (actual) IDP is then obtained from 3.1 with the aid of a projection for MN, ~s shown below. MN (1973) +81 1974 -155 1975 -124 1976 -124 1977 -124 For projections of IKP* and IKP, private investment in the steel industry and further investment in North Sea oil and gas (over and above the 1973 rate) are treated as exogenous: private steel investment (PS) is assumed to remain at its 1973 level of £45 million, whilst additional North Sea investment (NS) at 1970 prices is assumed to rise from £50 million in 1974 to £100 million per annum for 1975-77 inclusive. IKP* is then projected directly by the equation: IKP* = -3066 + 0.08Y* + 0.19Y*-l - O.lY*_2 +PS + NS Projected IKP is then obtained from IKP* using 3.2. 3.4 Table 4 Stockbuilding The task of constructing a satisfactory par series for stockbuilding proved to be a difficult oneg the approach finally ad~ted was based on an estimated relationship between stock levels and lagged GDPo Definitions~ S value of physical increase in stocks and work in progress H end~year value of stocks and work in progress H = H~l + S The estimated equation for stock levels wasg Taking deviations from par we then have H* = H + Oo3045 (Y*=Y) + Oo0951 (Y*~Y)=l Since S = H=H_ 19 it follows that S* = S + Oo3045 (Y*-Y) = 0.2094 (Y*=Y)_1 = Oa0951 (Y*-Y)_2 4.. 3 The resultant series for 1962-73 inclusive was not entirely satisfactory, however 0 so a further adjustment was made. A smooth trend was fitted through the par stock~output ratio series implied by 4o2 and extrapolated backwards t9 1960 and forwat'd to 1977; this trend series was used to obtain a new series for par stocks~ from which par stockbuilding is inferred by taking first differenceso 4o2 is then used to obtain future actual stock levels~ and thus actual stockbuilding~ conditional on the projection of actual GDPo A major reason for the difficulties posed for the analysis of stockbuilding is the sharp decline in the stock=output ratio since 1970 as a consequence of negative stockbuilding in 1971 and 1972o Some recovery at least of the stock= output ratio from its histori~ally low 1973 level seems probablep and it was considered unacceptable that~ due to this influence of recent years, the par stock=output ratio should show further rapid decline in the futureo As it is~ the par stock-out'put ratio obtained by the method described above shows only slow trend decline, and this is reflected in a recovery of the projected actual stock-output ratio in 1974 to over 38%p with only slow decline thereaftero Table 5 Balance of Payments This table shows the main components of the balance of ~ayments for the entire period under rev1ew, with estimates of the impact on the U.K.'s net liquidity position. All items are at current prices. Figures for 1960-73 were derived from the official balance of payments statistics except that those for 1973 were estimated with the help of three quarters' published figures. Figures for 1974-77 are projections which show the implications for the balance of payments of G.D.P. growth of 2% per year after 1973. Definitions BT Balance of trade in goods and services PIA Property inc<Jme from abroad, net. Interest, profits and dividends earned overseas, net of overseas tax, minus payments overseas, net of U.K. tax. (a) Before allowing for (b) and (c) below. (b) Interest and profits on overseas investment in North Sea oil. Inclu~es payments on the direct capital stake of foreign oil companies and on long-term f~reign borrowing by British-companies to finance oil exploration and development in the U.K. sector of the North Sea. Also includes an allowance for the reduction in earnings of U.K. oil companies attributable to reductions in U.K. imports of oil. (c) Interest on higher borrowing needed to finance deficits in the period 1973-76, starting with interest on Eurocurrency borrowing for that purpose in 1973. Deficits are those shown under 'basic balance' (BB, defined below). GT Government current transfers abroad, net. PT Private transfers abroad, net. B Current balance of payments. Long-terrri investment overseas, net Inflows of direct, portfolio, "oil and miscellaneous", and official long-term investment from overseas, minus outflows. Foreign currency borrowing by U.K. banks to finance investment overseas is count:ed as long-term inward inves tmenL Official long-term investment (net) includes U.K, capital subscriptions to the European Investment Bank and the E.C.S.C., transactions involving the U. S. Export··Import Bank credit for purchase of U.S. military aircraft, U.K. subscriptions to the I.D.A. and other develop· ment agencies, and re·payment of long-term U. S. and Canadian Governl"lent credits. Trade credit, net Import credit received from unrelated firms, minus export credit granted. Values for 1960-62 are estimated on the basis of changes in imports and exports, assuming constant credit/trade ratios. Capital Transfers Payment under the guarantee clauses of the Sterling Agreements. BB Basic balance of payments B +long-term investment overseas, net+ trade credit, net+ capital transfers. Overseas currency borrowing by U.K. banks·to finance lo~ns to the U.K. public sector. Borrowing under the exchange cover scheme announced in March 1973. In this table such borrowing is counted as a special financing item that, considered on its own, improves the U.K.'s net liquidity position (see 'net liquidity effect' below). D Allocations of I.M.F. drawing rights, special and ordinary (net of gold contributions to the I.M.F.), E.E.A. profits/losses and revaluations affecting the reserves and short-term assets and liabilities, so far as these are identified in the official Balance of Payments accounts. (See U.K. Balance of Payments, 1973, Table 41, and earlier editions). In this exercise, the official reserves since 1971 were valued at market exchange rates, not at the official parity rate. Net liquidity effect Changes in the balance of official reserves (including special I.M.F. drawing rights and unused lines of credit at the I.M.F.) minus net short-term external liabilities in official and private hands. Identically equal to BB + D + overseas currency borrowing by U.K. banks to finance U.K. public sector loans. A minus sign indicates a deterioration in the net liquidity position. Projections for 1974-77 BT See Table 11 of this appendix. In the case of most other items, the procedure was to project past flows in real terms, using a variety of methods. Items wholly or largely fixed in overseas currency terms, such as property income from abroad or the U.K.'s contribution to the E.E.C. budget, were expressed in real terms by deflating sterling values at current prices by the price .deflat"or for U.K. imports of goods and services. Items wholly or largely fixed in sterling terms, such as profits and interest on inward investment, together with inward investment itself (a large part of which is financed from retained profits earned in the U.K.), were dealt with by deflating current values by the G.D.P. deflator. Projections in real terms were then expressed at current prices assuming an average rate of inflation of sterling values of slightly under 6 per cent per year, 1973-77, for all items. PIA (a)The principal components of interest, profits and dividends were projected separately on the basis of logarithmic trends in their real values since 1960. (b)The estimates of interest and profits payable on foreign investment in North Sea oil were based on a special study of North Sea oil prospects. Among the assumptions which are critical to the results are the following: output of oil from the U.K. sector of the North Sea will be some 15 million tons in 1975, rising to 60 mn. tons ~n 1977; some 75 per cent of all net investment in the U.K. sector is and will continue to be financed directly or indirectly from abroad; gross investment in the U.K. sector will be running at nearly £500 million p.a. by 1975 and will decline slowly thereafter; interest on the foreign share of the accumulated net investment will be payable at about 8%; oil company profits after depreciation, interest and U.K. tax will be limited by Government policy to some £4 per ton, rising to £5 per ton by 1977. (c)Interest on higher short-term borrowing was calculated at the rate of about 8 per cent on accumulated net borrowing to finance deficits implied by G.D.P. growth at 2% p.a. - some £8,500 million by end1977, not counting drawings on the official reserves of £1,800 (all of which was assumed to occur in 1974). 8 per cent is midway between the likely rate on official borrowing, 5 per cent, and that on Eurocurrency borrowing, 11 per cent or more. It was also calculated that interest payments on deficits implied by G.D.P. growth at 3 per cent per year would amount to approximately f750 million by 1977, while those implied by G.D.P. growth at 1 per cent p.a. would be approximately f400 million by 1977. GT Projected on the basis of estimates in the Public Expenditure White Paper (Cmnd. 5178), as was the U.K. contribution to the E.E.C. budget. Long-term investment overseas Direct investment (excluding associated foreign currency borrowing) was projected on the basis of logarithmic trends in real flows since 1960. Separate projections were made for investment in E.E.C. and non-E.E.C. areas and adjustments were made to reflect relaxation of restrictions to the E.E.C. after 1974. Outward oil and miscellaneous investment was projected on the basis of the slight downward trend in this item, measured in real terms. It should be noted that, unlike the series for direct investment, the published series for oil etc. is shown net of associated external borrowing by U.K. parent companies. Overseas currency borrowing to finance direct investment overseas, whether directly by U.K. parent companies or via U.K. banks, was projected to grow slightly faster than direct investment overseas. Overseas investment in the U.K. public sector was made to grow more rapidly than in the past in reflection of the new exchange cover arrangements. Other items of inward investment were projected in line with past trends. The net of outward portfolio investment and associated foreign currency borrowing was put at zero. The main componenmof official long-term investment were projected with the help of the Public Expenditure White Paper and recent Treasury Press Releases. Trade Credit The basic method for projecting expansion of import credit was briefly as follows: = .055 (6M)t = .210 (6X)t 'ltua ·· ad' !'X are respectively, total import and export credit outstandi~g at the ~nd of year t (bTM = TM - TM ), M and X are imports and exports of goods and seFvices, t t-l TT (.M1!) 1973 = .055, and (_!) 1973 = .209, X all items at current prices. However, since this method gave rise to unreasonably large increases in net export credit (assuming exports and ~er~ implied by G.D.P. growth of 2 per cent p.a.), the import credit ratio ~ was allowTd to increase to 0.70 by 1977 (thus regaining its 1972 level), while ~ was made to to fall further to 0.20 in 1974 from its 1972 level of t 0.24, subsequently regaining its 1973 level by 1977. The results were finally reduced by about £100 million per year to remove net export credit between related firms (part of direct investment overseas). Tables 6-12 The Balance of Trade on GooJ& and Services For the preceding tables 1-4 a sufficient definition of par consists of specifying a constant rate of unemploymenL However, the par economy is further defined by the condition that the U.K.'s competitiveness in world trade is sufficient to ensure that specified balance of payments targets are being met. The preliminary stage in the construction of par is to analyse trends in the balance of trade by correcting the actual trade balance for deviat~ons from trend; since in general the trend balance of trade does not fulfil th~ par targets, the next stage is to est1mate what additional adjustments to trend competitiveness would have been and would be necessary 1n order that those targets should be met. The aim of the analysis of the balance of trade can thus be summar1sed as follows: 1) To estimate the trend balance of trade, i.e. the course the balance of trade and its various components might have followed at par demand pressure and if world trade, U.K. d.Jmestic. inflation and U-.K. relative costs had all followed their respect1ve trend paths, 2) To extrapolate the trend balan~e of trade and then use this extrapolat1on to prOJe~t the actual balance of trade to correspond to alternat1ve projections of demand and exchange rate pol1cy. 3) G1ven a set of par targets for the balance of trade, to estimate what levels of U.K. competitiveness would have been, and would be, necessary to achieve those targets. The net resource requirement of a satisfactory balance of payments position 1s then 1mplied by the trade target and the terms of trade required to achieve that target. Table 6 and 7 show actual past series for the balance of trade: X Exports of goods and services at 1970 prices H Imports of goods and services at 1970 prices X' Exports of goods and serv1ces at current pr1ces M' Imports of goods and services at current prices PX Price deflator for exports PX = X' /X PM Price deflator for imports PM = M' /M TT Terms of trade TT = PX/PM BT Balance of trade on goods and services at current prices BT = X' - M' Table 7 shows volume series and deflators resulting from the disaggregation of total imports into seven categories: FDT Food, drink and tobacco FU Fuels BM Basic materials SF Semifinished manufactures FM Finished manufactures AC u.s. aircraft sv Other (mainly services) Corresponding deflators are shown with prefix P. The trend balance of trade for the past (Table 9) is obtained by adjusting export and import volumes and deflators for deviations from trend in GDP, world trade and relative costs (Table 10): W World trade: the sum of the exports of goods and services ·at 1970 sterling values (£ million) of the U.K. and six major exporters - Canada, France, West Germany, Italy, Japan, U.S.A. UC U.K. unit labour costs in manufacturing (average hourly earnings divided by trend productivity) including adjustments in 1965 onwards for the effects of export rebates, S.E.T. premiums and the Regional Employment Premium RD U.K. relative costs in domestic currencies, i.e. UC relative to a geometric index of the unit costs (expressed in their own currencies) of the other six countr1es named above, using weights obtained from 1970 shares of each country in W. RX U.K. exchange rate (pounds per u.s. dollar, 1970 · 1) relative to a geometric index (constructed similarly to RD, using the same weights) of the exchange rates of the other six countries. RC U.K. relative costs corrected for exchange rate changes Y GDP (Table 1) The equivalent series for the trend balance of trade are: w" trend world trade UC (not shown) trend unit costs RC trend relativ® costs Y* piU GDP Thl! indict';fJ tiC, E!D, RX, RC lire 'Hl l expt'e8!H~d to base 1970 .., 1. Except where otherwise specified, all trend series in the trade analysis are the result of fitting logarithmic trends to actual data for the period 1965-73, and extrapolating forward and back where required. There is a marked acceleration in the rate of growth of trade volumes and costs after the mid-sixties, and it is this accelerated trend which is relevant for the analysis of present trends in the balance of trade. The rules according to which the various adjustments are made are described below: 1) Export volumes are adjusted for cost differences (subject to a geometric lag) and for world trade: X W- X X W- X ~~t I " \ IT I ) = 1960 \ 6.1 Because of the improvement in relative costs after 1965, and the effect of extrapolation of the trend series to 1960, trend relative'costs in 1960 are 5% higher than actual relative costs. However, we assume that there ar~ no differences between trend and actual costs prior to 1960. Trend exports in the early 1960's are thus higher than if the pattern of cost differences were extrapolated back beyond 1960. 2) The volumes of imports of fuels, basic materials and semifinished manufactures are adjusted in accordance with their respective marginal import contents of GDP: FU = FU + 0.02 (Y* - Y) BM BM + 0.04 (Y* - Y) SF SF + 0.1 (Y* - Y) Finished manufactures are adjusted by: y:)FM FM ~Y* \4.0 6.2 6.3 6.4 6.5 No adjustments for variations 1.n GDP were made in the other three impo.rt categories - food, drink and tobacco, services and U.S. aircraft, 3) The deflators for exports and imports (excluding U.S. aircraft) are adjusted for domestic inflation, relative costs and world trade: l (~fj [ (~r l (*?-P. = P. ll uc uc ().1 uc_1 uc._1 2 (1-a.l) 6.6 The coefficients used in 6.6 are: ().1 ().2 ().3 PX PFDT PFU PBM PSF PFM PSV 0.87 0.5 1.0 1.0 o. 76 0.8 1.0 -0.52 -0.65 -1.0 -0.47 -0.63 -0.80 -0.23 0 1.5 0 1.5 1.04 0 0 1960 values for the trend deflators are obtained by backward extrapolation of trends fitted through the series given by 6.6 for the years 1961-73. The next stage is the extrapolation of the various components of the trend balance of trade as obtained above in order to show expected future movements of the underlying trade position and to provide a base for projections of the actual trade balance. Projected Y* is as in table 1: W, UC and RC for 1974-77 are extrapolations of their fitted trends. The aim of the adjustments made in 6.1 to 6.6 above is to extract smooth trend series for exports, the various categories of imports, and their deflators. Lack of smoothness in these series implies the presence of factors which are not accounted for by the adjustments used; examples of this are the elements of "bad luck" described in Chapter 7, such as the sharp upward movements in fuel and commodity prices in 1973. Where possible the trend series for imports and exports are projected by extrapolating on a smooth trend, with the following exceptions to take account of recent abnormalities and other known factors: Food, drink and tobacco The volume of imports is projected to remain at the 1973 level to take account of increased domestic food production due to E.E.C. membership. By the fourth quarter of 1973, the deflator implied by 6.6 is e&timated to be 20% above its smooth trend value. Half of this discrepancy is assumed to disappear by 1975, but the remainder to persist thereafter. '. · Fuels Trend imports are projected to decline by 1977 to 55% of the 1973 level with increased substitution of domestic energy sources for imports of oil. The price of .fuel imports is assumed to double between 1973 and 1974, and to incr~ase at 5~7. per annum thereafter. Basic materials and semifinished manafactures By the fourth quarter of 1973 the adjusted deflators are estimated to be 167. and 12!% respectively above trend, due to the boont in world commodity prices. These off-trend elements are projected to vanish by 1976 on the assumptiott that the peak of the boom in commodity prices has already been teached. The series for semifinished and-finished ~nufactures are adjusted before fitting the trend for extrapolation to take account of the effect of the 1964 import surcharge in reducing and postponihg imports in 1965-67. The trend projections described a\;ove are the basis of the summary projection of the trend balance of trade shown in Table 8. Table 11 shows projections of the actual trade balance on three alternative assumptions about future GDP, and Table 12 the details of disaggregated imports for the 2% growth projection. These projections are obtained by using 6.1 to 6.6 to adjust the trend projections for the assumptions made about GDP and the variables shown in Table 16. Thus world trade is assumed to return to its trend path ~n 1974, whilst U.K. unit costs increase at 9.6% per annum. RD is assumed to remain unchanged from 1973 and RX to remain at the level I'eached in mid-December 1973, equivalent to a 17!% devaluation since December 1971.. Further alternative projections are feasible on the basis of different assumptiorts for these variables, in addition to those obtained by varying the projected growth of GDP. Table 9 shows the components of the par balance of trade: this is obtAined fr6~ the trend balance by choosing a series for par competitiveness, A RC~ (see Table 10), to replace RC such that the corresponding adjustments made in 6.1 and 6.6 yield approximately tpe target balance BT*. Keeping the resulting par terms of trade constant, expo.rt volumes are then adjusted to yield. the exact balance: X* = (BT* +PM* . M*)/PX* 6.7 Tables 13, 14 Expenditure on GDF These taoles summarise the resource implications of the analysis and projections described in preceding tables, in particular the implications for consumption. For the par economy and for projections of the actual economy, consumption is inferred as a residual from GDP and the other expenditure items. C Consumers' expenditure A Adjustment to factor cost R Residual error: compromise less expenditure estimate Hence R = Y + A - C - CG - I - S - X + M 13.1. For the projections in Table 13, future R is given by extrapolating a linear trend fitted to past values. A is decomposed into net indirect taxes attributed to categories of expenditure, and the factor cost adjustment allocated to consumption as a proportion of consumers' expenditure at market prices (not shown in the tables) is obtained from AC = (A - 0.0689 CG - 0.0793 I - 0.0398 X)/C . 13.2 where the coefficients on CG, I and X are the corresponding rati.:~s for tho.se expenditure items in 1970. AC varies. with the ratio of consumption to GDP, and is projected by the equation: Ac = o.o121 + o.2234 c Y+ o.ooost (1960: t = 1) Projections of future actual consumption as a residual are then obtained by solving 13.1 to 13.3 for C, AC and A. These projections, shown in Table 13, show what consumption would have to be if each projection taken as a whole is to be internally consistent: fiscal policy ~s implicitly assumed to ensure that the required level of consumption is in fact generated. The par economy is assumed to have the same residual error as the actual economy: 13.1 to 13.3 are then solved again using par series for expenditure ~net c:utpUt· to obtain C* and A* as shown in Table 14. Again consumption is interpreted as a residual: C* shows the resources available for private consumption under par conditions. · Table 15 Retail Prices. This table provides a projection of the Retail Price Index on an annual basis corresponding to assumptions about future movements in domestic costs and import prices. The general method again involves working with deviations from par. RPI All items Retail Price Index TC Net revenue from taxes on consumption as a proportion of con~umers' expenditure at 1970 prices. WC Unit wage costs~ basic hourly rates + employersv contributions per head in manufacturing (excluding engineering) divided by trend productivity PGM lmport prices: price deflator for imports of goods and services (see Table 6) recalculated excluding services and US aircraft and increasing the weight given to food, drink and tobacco by 70% to incorporate the assumption that domestic food prices move with the prices of imported food, All the above are expressed as indices to base 1970 100" The par retail price index is given by RPI* = RPI + 0.1 (TC* - TC) + O. 38 (WC*- WC) + Oo20 (WC*-l - WC_1) + 0.19 (PGM*- PGM) + 0.13 (PGM*-l- PGM_ 1) 15.1 TC*, WC* and PGM* are obtained by fitting logarithmic trends to the period 1965-73 and extrapolating back to 1960 and forward to 1977. RPI* 1s projected by extrapolating its 1965-73 trend growth rate from the 1973 figure. WC is assumed to grow at the same rate as the other, but differently defined,nnit cost variable UC (see Table 10) and PGM is recalculated from the corresponding projected import price deflator in Table 11. TC is assumed to grow at the same rate as RPI, so that for projected RPI we solve: RPI = : RPI*- O.lTC*- 0.38 (WC*- WC) -0.20 (WC*-l- Wc_1) - 0.19 (PGM*- PGM)- 0.13 (PGM*-l- PGM_1)=l / 1- OclTC_1 RPI_l-' 15.2 and TC = RRPPIf -1 · TC_ 1 15.3 These projections make no explicit allowance for any feedback effects from retail prices to wage costs, etc. The first-round effects of a devaluation, for example, are allowed for via the effect on import prices, but no allowance, over and above the assumption already built in about future wage movements, is made for possible further repercussions on labour costs through increased wage claims. - Table 16 Real national income and consumption Real national income is a measure of the total resources available for domestic expenditure (including consumption and investment, both public and private) given a constant balance of payments target on current account. RNI Real national income, index 1970 ~ lOO To ensure the exact identity Balance of payments on current account .':: national income - domestic expenditure national income at current prices is defined as G.D.P. at factor cost plus net income from abroad less net transfers abroad, and domestic expenditure is defined at factor cost inclusive of the residual error arising from discrepancies between the expenditure and compromise estimates of G. D. P. National income in real terms is then defined as national income at current prices divided by the deflator for domestic expenditure at factor cost (P.D.F.). The identity above can be used to construct estimates of real national income (in£ million at 1970 prices) as follows: Domestic expenditure at factor cost · Y + M - X Real national income !! B/PDF + (Y + M - X) Projections of real national income for G.D.P. gro~th at different rates incorporate balance of payments projections in Table 11 and are therefore based on the same assumptions about world trade and relative costs. The overall balance on current account (B) includes projections of net foreign income and transfers from Table 5, with interest payments adjusted to take account of differing patterns of borrowing from abroad. The deflator, P.D.F., is estimated for future years using the retail price. index (R.P.I.) in Table 15. Projections of personal consumption are taken from Table 13.  Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Statistical Appendix Creator An entity primarily responsible for making the resource Cambridge Economic Policy Group Source A related resource from which the described resource is derived Prospects for Economic Management 1973 - 77 Statistical Appendix Date A point or period of time associated with an event in the lifecycle of the resource 1974