Review of the quarter's economic trends [April 1980]

This brief paper surveys recent world and UK economic data and reveals that there are some signs to suggest that the world economy will withstand the 1979 oil price shock better than it did in 1973/74. The main difference is that the 1979 price rise was not super-imposed on as severe an inflation as that which occurred on the previous occasion. The present rate of increase in the world prices should not reach the levels of the last cycle when the twelve month increase in manufacturing prices peaked at 23%. Advance warning by US economists that 1979 was going to be a year of difficulty did not go unnoticed by businessmen in that country who took steps in 1978 to avoid a repetition of the inventory boom and bust cycle which had proved so costly in the recession of 1973/74. Also, consumer expectations are adjusting towards a continuing rise in the price of oil. In the UK real GDP is expected to fall by 2½% from mid-year 1980. Thereafter, it is assumed to grow at an average annual rate of 1% for the next four years.