The effects of the miners' strike and the associated electricity restrictions make it even more difficult than usual to interpret the data available for estimating the level of activity in the most recent quarter. Industrial production is provisionally estimated to have fallen by about 2¾ per cent in the first quarter and, as we might expect the output measure of GDP to have been more severely affected by the strike than either the income or expenditure estimates, we have interpreted this as implying a fall in ‘compromise’ GDP of about 1¼ per cent. This (after allowing for the strike effects) is broadly consistent with our forecast in February.

Our view of the world economy has on the whole changed very little since February. Fuller information tends to confirm our main estimates for 1971, in particular that real economic growth in the OECD countries was around 3¼ per cent and that the dollar value of world trade increased by just over 11 per cent (of which price changes accounted for rather less than half). And we still expect OECD growth in 1972 to be close to 5 per cent and the rise in dollar value of trade around 17 per cent, with prices and volume contributing fairly equally. It is, however, hard to say whether or not this assessment is supported by developments so far this year, as the course of both output and trade has been affected by strikes, and the relatively mild weather in Western Europe in the early months appears to have mitigated the normal seasonal fall on the Continent in output and employment.

The development of a medium-term model of the British economy has proceeded in Cambridge continuously since 1960. Its purpose is summarised by the preface to the series of papers which describe the main research results: ‘The aim of the project is to study quantitatively in as great detail as possible the present structure and future prospects of the British economy, the possibilities of stimulating its rate of growth and the problems to which this would give rise.’[1] The model was always intended to help in planning and policy making and two sets of alternative projections of the economy, for 1970[4] and for 1972[5], have been published. In the last two years with the comprehensive incorporation of the fiscal system the model has been much more oriented towards economic policy making.

This article is one of a series describing attempts made at the National Institute to develop formal methods of preparing short-run forecasts of United Kingdom exports. The first article was concerned with British exports of manufactures to industrial countries and the second with exports to primary producers.