This chapter begins with a brief general appraisal of the economic situation. The second section discusses output, income and the main items of expenditure and the third, the movement of employment and unemployment. A fourth section deals with the balance of payments, and in a concluding section there is a brief discussion of the implications of our forecasts for policy. The situation and prospects of the rest of the world are examined in Chapter II.

The outlook for world production and trade in 1964 and early 1965 has not changed much since February. Continued strong expansion in the United States seems certain now that the tax cuts have been enacted; and there is rather more evidence of a slackening in the pace of growth in France and Italy. World trade should again rise rapidly, though the reserve position of some primary producers is rather weak and they may not be able to increase their imports a great deal further in 1964. Quite large gains and losses of reserves are to be expected among industrial countries, particularly in Europe.

The United Nations' Conference on Trade and Development now in session in Geneva is concerned essentially with the evolution of new policies for international trade which would assist the under-developed countries to expand substantially their current level of earnings from exports. The purpose of the present article is not to discuss the many alternative proposals which have been put forward at Geneva, but rather to examine the facts behind the slow growth in the export earnings of the underdeveloped countries over the past decade or so.

A memorandum recently submitted by the Purchasing Officers Association to the National Incomes Commission reports that there have recently been many increases (averaging 4-5 per cent) in the prices of engineering products, and suggests that many of these were not justified by changes in costs. Similar reports and conclusions have appeared in the press.