The Economic Situation: Annual Review: Chapter I. The British Economy: 1966 to Mid-1968

The main statistical propositions about the British economy in 1966—on the movement of output, employment, the balance of payments and prices—are these. National output fell through the year. It is difficult to disentangle its exact course in the two middle quarters because of the seamen's strike. By the last quarter national output had probably fallen something like 1½ per cent from its level in the first quarter, so that in the year 1966 as a whole it was about 1 per cent higher than in 1965. Unemployment was slow to start rising : it did not turn up until May. Thereafter it went up sharply, reaching 1.9 per cent (wholly unemployed, seasonally adjusted) in December. The balance of payments trade deficit, which in 1965 was about half that of 1964, roughly halved again in 1966 : but there was still a deficit—taking current and long-term capital items together— probably of the order of £150 million. So by the end of 1966 the accumulated current and long-term capital deficit for the three years 1964-66 totalled some £1,130 million. Retail prices during the year rose 3.8 per cent; tax changes accounted for about 1½ per cent of this, and in the second half of the year, from June to December, the rise was only 0.7 per cent if tax changes and seasonal fuel and food price changes are excluded. Hourly wage-rates, which in the year to July 1966 had risen 6½ per cent, thereafter levelled off completely. The wholesale price index for manufactured goods was also only fractionally higher in December than in July, and the export price index also levelled off (although here the change-round in non-ferrous metal prices explains some of the flattening) (chart 1).