Welsh Journals

8. WALES IN 1987: AN ECONOMIC SURVEY* Dennis Thomas THE BRITISH EXPERIENCE Forecasting the performance of the British economy in 1988 is a particularly hazardous exercise, but there is general agreement concerning the movements, if not the implications, of the key indicators in 1987. 1987 has been recorded as a year of rapid growth, as a cyclical upturn in manufacturing output was accompanied by a strong rise in spending on services. Estimated at around 4.5 per cent in GDP terms, this growth was basically due to a rapid and sustained increase in consumer spending, of about 5 per cent, fed by rising real earnings and tax cuts, but in particular due to an increased demand for consumer credit. The savings ratio fell, producing a personal sector financial deficit for the first time since 1959. Both fixed investment and stockbuilding recovered from the levels of 1986. Having risen by only 0.5 to one per cent in 1986, manufacturing output showed a significant increase estimated at around 5.5 per cent. This increase must be placed in context. Output and productivity in manufacturing have been growing strongly since the early 1980s, but because of the depth of the recession British manufacturing output has only recently, in 1986, regained the peak achieved in 1979, itself lower than the earlier peak of 1973. The import of manufactured goods again rose very rapidly in volume during 1987, by more than 10 per cent year on year, and offset a substantial rise in the volume of manufacturing exports of some 8.5 per cent. According to National Institute calculations, the current account of the balance of payments was in deficit in 1987 by over £ 2.5 billion. After an unexpected surplus in the first half of the year, the current account moved back into large deficit in the third quarter and for the second half of 1987 the deficit has been estimated as running at an annual rate of about £ 5 billion.