An increase in unemployment to between 2.3 per cent, and 2.5 per cent by the end of 1967 is forecast by the National Institute in its latest Economic Review. The actual figure for the final quarter of next year is expected to average between 578,000 and 615,000 depending on how quickly employers adjust to the latest output trends. This would compare with an estimate of 584,000-602,000 for the coming winter which many would argue errs on the low side.
More significantly, on the assumption of no change in present Government policies, there will be a further substantial rise in unenployment in the first half of 1968. Owing to time lags this would probably happen even if output were by then rising fairly rapidly. On the other hand the National Institute forecasts a balance of payments surplus of £250m. on current account alone next year (compared with a deficit of £173m. this year) and an overall "basis balance" of £200m. The Institute believes that by the middle of next year the Government will be in a difficult dilemma, as it will have to choose between allowing unemployment to rise further in 1968 or allowing the balance of payments surplus to fall off.
The only other alternative would be to do something to "change export competitiveness or import propensities." But it is not optimistic on this score. It points out that Britain's share in world trade in manufactures has probably fallen by 0.6-0.7 per cent, this year, which is no better than the average of the last decade.
The National Institute obviously believes the Government has left itself few options to prolonged deflation or another foreign exchange crisis; it sugeests more resources for export promotion and adds that "even propaganda is better than nothing."
The authors of the review pose the Government's dilemma in arithmetical form by stating that balance of payments considerations would probably only allow for an increase of 24 per cent in national output in 1968, and this will not be sufficient to bring the rise in unemployment to an end.
National output, according to the Institute, has been falling since the peak it reached in the first quarter of 1966; but it is likely to increase slightly - 1.4 per cent is the suggested rate - in the course of 1967. There could on the other hand be a further small fall in industrial production in the New Year.
The National Institute has revised downwards its export forecasts for 1966 by £75m. After making adjustments for the seamen's strike it comes to the conclusion that there was no upward trend at all in exports during 1966 until the October upsurge. On the other hand, the volume of imports of goods and services looks like being 3$ per cent higher this year than last, compared with a rise in national output of only # per cent. This is partly due to exceptionally high expenditure on foreign shipping as a result of the strike and progress payments on American military aircraft.
from an Economics correspondent,