Industrial production, and within it manufacturing output, continued to fall in the first two quarters of 1981; output in the second quarter was about 2 per cent below the 1980 fourth quarter level (Statistical Appendix table 2). This is a substantial slowing in the rate of fall: from the second quarter of 1979 to the fourth of 1980 manufacturing output was falling at a rate of about 3 per cent a quarter and the total at a rate of 2½ per cent.

Since the beginning of this year speculation regarding the future of the economy has centred on whether the lowest point of activity in the current recession has yet been reached. Our forecasts in February and May suggested that, while the decline in GDP (average estimate) was arrested round about the first part of this year, no significant change was expected during the rest of 1981 and only a very limited upturn in 1982. Our forecast on this occasion, summarised in tables 1 and 2, suggests that the bottom of the recession in terms of that measure of activity was reached in the first half of this year and that some marginal improvement is to be expected from now on, giving a rise in GDP of ¾ per cent between the fourth quarter of 1980 and the fourth quarter of this year and a further ½ per cent by the fourth quarter of 1982.

After three quarters of gradually accelerating recovery, the total output of the OECD countries reached a new peak in the first quarter of 1981—about ½ per cent higher than it had been a year earlier. Demand has revived rather less for consumption (including public authorities' current spending) than it has for investment (table 1), but probably for services rather than goods, as industrial production remained well below its peak (table 2). Geographically the recovery was concentrated in North America and in Japan; in Western Europe output remained depressed, particularly in the industrial sector, and there was not much sign of revival in the second quarter, when a slight fall in output in the United States was probably sufficient to halt the upturn in the OECD area as a whole. There are signs of export-led recovery in West Germany and of levelling out in the United Kingdom, but the Italian economy seems to have turned downwards again and French industrial output remained depressed in the second quarter.

This article sets out a general framework within which the sectoral distribution of pay can be examined. The main evidence on income from employment is then analysed with a view to answering questions about overall changes in total pay bills, and gross earnings of individuals in the public and private sectors.

This article examines the movement of output per employee in one hundred and sixty industries between 1968 and 1979. It concludes that the slowdown in productivity and output growth rates observed for aggregate manufacturing industry since 1973 was fairly typical of the experience of most individual industries; and that no shift in the relation between productivity and output growth could be identified.

In the article we explain the basis of a series of comparisons of the explanations of the major macroeconomic variables in the UK economy which we are undertaking in a research project financed by HM Treasury. We seek to explain why it is that, despite the apparent objectivity of econometric method, modellers of the economy have published widely differing results. We illustrate our method with findings from the study of exports of manufactured goods, which present some clear examples of the difficulties encountered throughout the project. Full results will be available from the Institute.

In the Review of February 1981 the NIESR Model (hereafter NM) errors for 1972-80 for GDP and inflation were juxtaposed with the Liverpool Model (hereafter LM) errors reported in Minford (1980a) and other references. It was stated that this was a ‘direct comparison’. It was also stated that my comparison of the LM errors with the actual forecast errors made by NIESR ‘was not a proper one’. The object of this note is (a) to deny the first statement and (b) with respect to the second, clarify the sense in which my comparison (Minford 1980a) was indeed proper.