Consumers' real incomes and their expenditure are rising quite fast, the slowdown in price inflation unaccompanied yet by any slowdown in wage inflation. But the increase in investment demand has slackened and exports have stagnated since early last year. For the past 12 months or more total output has grown comparatively slowly as a result. It was probably about 1 ½ per cent higher in the second quarter than a year before. Manufacturing production may not have increased at all. These developments are broadly in line with the forecasts we were making a year ago.

Although information is still very incomplete for the second quarter, it seems likely that total output has continued to rise this year at a moderate rate—perhaps 1 ½ per cent a year. On constant fiscal policies, we would expect demand to grow just sufficiently during the rest of this year and in 1987 to keep non-oil GDP rising at about this rate, or perhaps just a little faster. Unemployment is still rising; the figures may soon level out, or possibly decline a little, under the impact of the special employment measures. Inflation is lower than for many years; it will probably edge up. The fall in oil prices has transformed the balance of payments. There could be a deficit on current account of substantial proportions in 1987.

Fuller data confirm the impression which we formed in May that OECD countries' total output did not change much in the first quarter. It probably increased by about ¼ per cent, with even this small rise attributable wholly to stock movements in the US. Final demand in the US fell and there were declines in total output in a number of countries, including Japan, Germany, Australia, the Netherlands, Switzerland and possibly Italy (for which there are conflicting estimates), white France achieved only marginal growth. The fall was notably severe in Germany, where construction suffered badly in the cold winter. This probably had a wider impact also, and, in North America at least, the initial effect of the slump in oil prices seems to have been depressive, with drilling activity sharply reduced, especially in the US. There may also have been a tendency for expenditure, perhaps on investment in particular, to be deferred in the expectation of falling prices and interest rates.

The most recent peak in the production of UK manufacturing industries was in 1973; ten years later, in 1983, the level of manufacturing output was still 15 per cent lower.

In the same period the official output index for services (as measured by value added and other methods) increased markedly and one of its sections—Division 8, covering banking and finance, insurance, leasing, business and professional services—grew particularly rapidly, by about 70 per cent.

Applied macroeconomists commonly regard the seasonal variations of the economy as a hindrance rather than a help to the understanding of behaviour. Thus both in commenting informally on economic developments and in the more formal tasks of modelbuilding and forecasting seasonally-adjusted data are almost invariably used in preference to raw data when both are published. The nature of the patterns displayed by seasonal variation is very little discussed. One purpose of this note is simply to describe seasonal variation as it is estimated in some of the official data series, providing some tables which may be useful for general reference. But the aim is not just descriptive. It will be argued that seasonal variations may throw useful light on some controversial issues in macroeconomics.

In 1980 the unemployment rate (on standardised OECD definitions) for under-25 year-olds was 14 per cent in the United Kingdom, 15 per cent in France and 4 per cent in Germany. This year it is expected by OECD that these rates will be 21 per cent in this country, 31 per cent in France and 9 per cent in Germany. In all three countries special measures have been introduced in an attempt to reverse the trend. In this note we outline the circumstances in which this rapid increase in youth unemployment has occurred and then describe the measures taken in each country to combat it.

The UK's economic performance, like that in many industrial economies, worsened in the 1970s after about twenty years of relatively stable and strong growth and low inflation. This article investigates to what extent this worsening in performance can be attributed to factors outside the UK's control—to world recession—and how far it was the result of domestic policies. Simulations of the NIESR model suggest that about half of the slackening in output growth can be explained by these two sets of factors. Adverse trends in import and export behaviour appear the major behavioural impediment to faster economic growth.