Chapter II. The Forecast

The movement of the economy since we last reported seems to have been rather weaker than we were expecting. Output seems to have fallen in the fourth quarter of last year—a development which is all the more surprising since consumers' real incomes have been much higher than we anticipated; real personal disposable income is officially estimated to have risen by nearly 4 1/2 per cent in the third quarter of last year compared with our November estimate of only half this amount. The wage and salary bill rose by 8 per cent in current prices as thresholds were paid under Stage 3 agreements, as London weighting was increased and as post-Stage 3 catch-up settlements became effective. Current grants to persons rose by 15 per cent as the large uprating of pensions came into effect. The Forces too appear to have been given a large pay rise, and threshold increases and London weighting have also raised pay in other parts of the public sector.