Chapter II: The World Economy

A major feature of the world economy in the first half of the year was the recovery of output in the United States from the depressed level to which it had been reduced in the latter part of 1970 by the strike at General Motors as well as by the underlying recession. As a result, the rate of economic growth in the industrial countries was faster than it had been in either half of last year; but it was probably still well below the normal rate of increase in their productive capacity, and unemployment was tending to rise in the great majority of cases. However, we expect the rate of growth to accelerate further in the next twelve months or so, giving an aggregate increase in real output in OECD countries of 3½-4 per cent in 1971 and perhaps 5½-6 per cent in 1972. This implies that pressure on resources will be increasing again, particularly as the recent rate of investment in industrial equipment (as well as in stocks) appears to have been low and may not improve much until there has been a recovery in profits.