OECD economic outlook. 33.

179 Pages·1983·28.202 MB·English

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ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
OECD
ECONOMIC
OUTLOOK
ORGANISATION DE COOPER DEVELQPPEMENT ECONOMIOUES
JULY 1983
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ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The OECD Economic Outlook
provides a periodic assessment of economic trends and prospects in OECD countries,
developmentswhich largelydeterminethecourseoftheworldeconomy. Itappearstwiceayear
in July andDecember.
Each number contains an overall analysis of the latest economic trends and short-term
forecasts. This survey is thejoint work ofmembers ofthe Secretariat ofthe Department of
EconomicsandStatistics. Thejournalalsooccasionallycontainsspecialstudiesbymembersof
the Department or other parts ofthe Organisation designed to assist the interpretation of
economictrends. Referencestatisticsareincluded. TheFrench versionoftheOECD Economic
Outlook is entitled Perspectives économiques de l'OCDE.
TheOECDEconomicOutlookispublishedontheresponsibilityoftheSecretary-General. The
assessmentsgivenofcountries'prospectsdonotnecessarilycorrespondtothoseofthenational
authorities concerned.
Aseparatepublication, appearingonceayear,presentsHistoricalStatisticsinanalyticalform
for a twenty-yearperiod.
The Organisation for Economic Co-operation and Development (OECD)
wassetupundera ConventionsignedinParison 14thDecember, 1960, whichprovidesthatthe
OECD shallpromotepolicies designed:
- toachievethehighestsustainableeconomicgrowthandemploymentandarisingstandardof
livinginMembercountries, whilemaintainingfinancialstability, andthus tocontribute to
the development ofthe world economy;
- tocontribute tosoundeconomicexpansion inMemberas wellasnon-membercountries in
theprocess ofeconomic development;
- tocontributetotheexpansionofworldtradeonamultilateral, non-discriminatorybasisin
accordance with international obligations.
TheMembersofOECDare:Australia,Austria,Belgium, Canada,Denmark,Finland, France,
the Federal Republic ofGermany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the
Netherlands,NewZealand,Norway,Portugal,Spain,Sweden,Switzerland, Turkey, theUnited
Kingdom and the United States.
*
* *
© OECD, 1983
Application for permission to reproduce or translate
all or part of this publication should be made to:
Director of Information, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
TABLE OF CONTENTS
FOSTERING THE RECOVERY 7
THE IMPORTANCE OF INTERNATIONAL ECONOMIC LINKAGES 16
DOMESTIC AND INTERNATIONAL DEVELOPMENTS 23
Main Features of the Projections 23
Fiscal and Monetary Policies 31
Labour Markets 44
Wages, Costs and Prices 50
Foreign Trade and Current Balances 59
International Monetary Developments 66
Effects of Changes in Energy Prices 75
DEVELOPMENTS IN INDIVIDUAL COUNTRIES 81
United States 81 Austria 114 Netherlands 120
Japan 86 Belgium 114 New Zealand 120
Germany 90 Denmark 115 Norway 121
France 96 Finland 116 Portugal 122
United Kingdom 100 Greece 117 Spain 123
Italy 105 Iceland 118 Sweden 123
Canada 109 Ireland 118 Switzerland 124
Australia 113 Luxembourg 119 Turkey 125
TECHNICAL ANNEX 126
Detailed Supporting Tables and Charts 126
Technical Notes 149
Sources and Methods 152
Reference Statistics 157
CONVENTIONAL SIGNS
$ US dollar Decimal point
.
c US cent I, II Calendar half-years
£ Pound sterling Q1.Q4 Calendar quarters
mbd Millions barrels per day Billion Thousand million
Data not available Trillion Thousand billion
0 Nil or negligible s.a.a.r. Seasonally adjusted annual rates
Irrelevant n.s.a. Not seasonally adjusted
Historical numbers are presented as integers and decimals; estimates and forecasts
are presented as integers and fractions.
LIST OF TABLES
Page Table Page Table
25 1. Growth ofreal GNP in theOECD area 129 44. Commoditytrade forecasts: France
26 2. Growth ofreal GDP in otherOECD countries 130 45. Commoditytrade forecasts: United Kingdom
26 3. Development of real total domestic demand in the 130 46. Commoditytrade forecasts: Italy
OECD area 130 47. Commodity trade forecasts: Canada
27 4. Growth ofnominal GNP/GDP intheOECD area 131 48. TradebalancesofmajorOECDcountriesandcountry
27 5. Contributions tochanges in real GNP/GDP groups
29 6. Cyclical behaviour of GDP components at major 131 49. Trade balances ofotherOECD countries
troughs 131 50. Current invisible transactions of major OECD coun¬
31 7. Latest fiscal policy announcements in OECD coun¬ tries andcountrygroups
tries 132 51. Current balances of OECD countries (percentage of
34 8. General governmentfinancial balances GDP)
35 9. Discretionary and automatic changes in general gov¬ 132 52. Market prices of selected primary commodities
ernmentfinancial balances exported bydeveloping countries
38 10. Monetaryaggregates: recent trends and targets 133 53. Competitivepositions
39 11. Interest ratechanges in majorOECD countries 134 54. Summary balanceofpayments on current account of
44 12. Employment andproductivity theOECD area and other majorworld groupings
45 13. Unemployment in the OECDarea 134 55. Trade in manufactured goods: export market growth
45 14. Unemployment rates in otherOECD countries and relative export performance
46 15. Long-term unemployment in selected OECD coun¬ 135 56. Tradeofnon-oil developingcountries
tries 135 57. OPEC's balanceofpaymentson currentaccount
46 16. Youth unemployment in selectedOECD countries 136 58. Net imports ofoil
47 17. Total labourforce 136 59. OECD countries' exports toOPEC
51 18. Hourlyearningsin manufacturing 137 60. Easterncountries current balance
53 19. Unit labourcosts in manufacturing 137 61. OECD countries' exports to the Soviet Union and
53 20. Consumer prices Eastern Europe
55 21. Privateconsumptiondeflators in theOECD area 138 62. OECD countries' imports from the Soviet Union and
56 22. GNP deflators in theOECD area Eastern Europe
57 23. Pureprofitrates 138 63. OECDcountries'exportstoChinaand selected Asian
60 24. World tradesummary countries
61 25. ChangesinOECDcurrentbalancesbymajorcompon¬ 139 64. OECD countries' imports from China and selected
ents Asian countries
64 26. Current balances of major OECD countries and 149 65. Balanceofpayments ofnon-oil developingcountries
countrygroups 150 66. Oil market indicators
64 27 Current balancesofotherOECD countries 151 67. Oil market conditions
66 28. Summary balance of payments of selected OECD
countries
74 29. Interest rates and exchanges rates in selected OECD REFERENCESTATISTICS
countries
75 30. Oil prices,growth and inflation 158 Rl. Growth of real GDP at market prices in the OECD
78 31. Real energyprices and energy intensity area
79 32. Real gasolinetaxes in 1982 159 R2. Growth of real GNP/GDP - Seven major OECD
countries (half-yearly figures)
160 R3. Grossfixed capital formationas percentageofGDP
TECHNICALANNEX 161 R4. Grosssaving as percentageofGDP
162 R5. Surplus on current transactions with the rest of the
126 33. Comparison of private consumption deflators and world as percentage ofGDP
GNP/GDPdeflators 163 R6. Governmentfinal consumption expenditureaspercen¬
126 34. ExchangeratesofOECDcountries tageofGDP
127 35. Effectiveexchange rate changesofOECD countries 164 R7. Currentdisbursementsofgovernmentaspercentageof
127 36. Volume of imports of major OECD countries and GDP
country groups 165 R8. Total outlaysofgovernmentas percentageofGDP
127 37. Volume of exports of major countries and country 166 R9. Current receipts of government as percentage of
groups GDP
128 38. Foreign tradevolumes ofselected otherOECD coun¬ 167 RIO. Consumerprices
tries 168 R1I. Consumerprices (half-yearly figures)
128 39. Foreign tradeprices (averagevalues) ofmajorOECD 169 R12. Standardized unemployment rates in fifteen OECD
countriesand countrygroups countries
128 40. Foreigntradeprices (averagevalues) ofselectedother 170 R13. Current balances
OECD countries 170 R14. Current balances (half-yearlyfigures)
128 41. Commoditytradeforecasts: United Stales 171 R15. Exchangerates,nationalcurrenciesagainsttheUnited
129 42. Commoditytrade forecasts: Japan Statesdollar
129 43. Commodity trade forecasts: Germany 171 R16. Effectiveexchange rates
LIST OF CHARTS
Page Chart Page Chart
18 A. World GNPand trade in 1980 71 O. Current account and exchange rates
24 B. Leading indicators and industrial production 72 P. United States' effective exchange rate and current
32 C. Monetary andfiscal policyindicators balance
36 D. Monetary growth and interest rate trends 73 Q. Short-term interest rates
40 E. Velocityand real interest rate developments 79 R. Real energy prices to final users: sectoral energy
48 F. Real wagerigidity and productivityperformance intensity
50 G. Indexofnon-oil commodityprices in termsofSDRs
52 H. Wages,prices and profits TECHNICAL ANNEX
54 I. Changes in consumer prices
58 J. Profits, rates of return and investment in manufac¬ 140 S. Industrialoutput,foreigntradeandcurrentbalancein
turing the majorseven OECD countries
62 K. Measures ofrelativecompetitive position 144 T. Effective exchange rates ofOECD currencies: recent
67 L. Foreigndirect investment,officialcapital and selected developments
foreign borrowing 147 U. Dollar exchange rates of OECD currencies: recent
68 M. United States' foreign directinvestment developments
70 N. UnitedStates' exchangerates and interest ratediffer¬ 148 V. Exchange rates of major currencies against the
entials dollar
Historical Statistics
"Historical Statistics" is an annual publication which accompanies the July
issues of the OECD Economic Outlook. It contains the same kind of statistics as are
typicallyprojectedin theEconomicOutlookbutovera periodoftwodecadesending in
the most recent year for which data are available.
In general, the data are not basic statistics but derived or analytical statistics
designed to show the movements of major economic variables or, alternatively, the
structure or composition of various aggregates. The major topics treated include the
structure, composition and growth of national income, the labour force and foreign
trade; wages and price developments; and the evolution of financial variables. The
coverageisingeneralsomewhatwiderthattherangeofseriesprojectedintheEconomic
Outlook. The statistics are shown both for individual countries and for groups of
countries, including theOECD as awhole. Inordertoprovidea longterm perspective,
theannualfiguresaresupplemented byaveragescoveringperiodsofsixorsevenyears,
as well as the entire twenty-yearperiod. A selection ofgraphs illustrating the cyclical
behaviour of output and some other aggregates is also included.

Fostering the Recovery
Recent trends Thelong-expected economic recoverynow seems to be getting underway. By last
and prospects Decemberthecurrentandleadingindicatorsweresuggestingfairlygenerallythat,after
theunexpectedly sudden reduction in OECD exports to the non-OECD world, and an
important loss ofconfidence in a number ofcountries, recovery finally was imminent.
And, as the new year unfolded, this was progressively confirmed. So far, evidence of
recovery is clearest in the United States. Taking the first half of the year as a whole,
GNPgrowthintheUnitedStatesmayhavebeen2lA percentatanannualrate,muchas
expected last December. In Europe, declining GDP inthe second part oflast year has
given way to slight growth. Activity has grown in Japan, but remains weak by past
Japanese standards. Meanwhile inflation has continued to decelerate in nearly all
OECD countries, and by rather more than expected, especially in the three largest
countries.
It seems that the fledgling recovery should continue. This prospect appears most
solid fortheUnited States, wheregrowth maybe 3 percent thisyear (5 percentQ4 to
Q4) andperhapsAxk percentnextyear(4 percentQ4toQ4).Growthirthe3toV/i per
cent range seems likely for Japan. Europe remains the most uncertain area: it seems
mostlikelythattherewillbeaslowpickuptomodestgrowthinthe1 to2 percentrange,
but this cannot yet be said to be unequivocally under way. On the basis ofthis sort of
outputperformance, employment is likely to grow quite strongly in theUnited States,
and continue growing moderately in Japan. But in Europe as a whole, and most
countries individually, employment will probably continue falling and unemployment
continue rising, at least throughout this year, and possibly into 1984. Inflation is
expected to remain significantly below the 1982 rate, but with differentials among
countries remaining large. For the OECD area as a whole the current account ofthe
balanceofpaymentsisexpectedtochangelittleoverthenext 12to 18months;withinit,
however,theUnited Statesisexpectedtoshowadeficitrisingto$35-40 billionin 1984,
reflecting its relatively buoyant growth and the deterioration in its international
competitiveposition due to the strongdollar. Thecounterpart islikely to showup as a
large surplus in Japan, and reduced deficits in a number ofother countries, especially
France and some of the smaller deficit countries'.
Policy in this OECD Economics and Finance Ministers met in May to evaluate the emerging
conjuncture economicsituation and toconsidertheappropriate stanceforeconomicpolicy. Central
to the discussion, particularly in view of the unexpected weakness of non-OECD
countriesinthesecondpartoflastyear,wasarecognitionoftheimportanceofeconomic
linkages among countries and regions, and the need to strengthen the international
1. Anoverviewoftheprojectionsisgiveninthesection"MainFeaturesoftheProjections";subjectand
countrydetail is given in subsequentsections.
trading, monetaryandfinancialsystems. Theirprimaryconcernwasthatpolicyshould
permit a pick-up in economic activity that would prove sustainable over the medium
term, without touching off" renewed inflation.
They agreed on four basic policy principles for all Member countries:
"i) Policies need to be set firmly in a medium term framework to make clear the
steadiness of policy intent. This will, of necessity, call for flexibility in the
implementation ofpolicies when circumstances require.
ii) Pervasive economic linkages mean that the ability of individual countries to
achieve domestic policy objectives depends importantly on the policies and
performance of others. It is important for the consistency of policies that each
Member country take account of the international implications of Member
countries' policies taken together.
Hi) Theachievementofgreaterexchangeratestability,whichdoesnotimplyrigidity,
is a major objective and commitment to be pursued...
iv) Improvedeconomicperformance and higheremploymentrequire a balanced use
of macroeconomic and structural policies. Growing room emerges as inflation
diminishes and supply-side responsiveness increases..."2
Within these broad guidelines, it was explicitly recognised that countries are in
diverse economic situations, not all having been equally successful in establishing the
preconditionsfor a bettereconomic performance. Itwasjudged that the preconditions
have been met in a number of countries, accounting for about 70 per cent of OECD
GDP. Elsewhere, high inflation, structural imbalances or difficulties in monetary and
fiscal management remain central problems.
Ifindeedthepreconditionsforasustainedpick-upinactivityhavebeenachievedin
countriesaccountingforsome70percentofOECDGDP,aswouldseemtobethecase,
whatfactors are likely to prove important in determining whether or not a sustainable
recovery actually materialises? Recent policy discussion of this issue places more
emphasis on the specific role of investment, as well as the supply side of economic
performance more generally, than was the case in earlier cyclical episodes. In the
aftermath of the large supply shocks, substantial relative price changes and severe
inflation that OECD economies haveexperiencedoverthe last decade, thereis littleof
the earlier faith that demand side policies alone can ensure a satisfactory economic
performance.
The economics The role ofinvestment. While recovery of investment is seen as a key element in
ofsustainability re-establishing stable growth with acceptably low inflation, important, and as yet
unanswered, questions concern the role that investmentcan be expected toplay in the
processofrecovery. Furthermore, it isnotyetclearwhethera pick-upinotherdemand
components would prove adequate to bring about an investment upswing or whether
profitabilityisinadequateand needssomehowto beimproved. Insomerespects OECD
economies are in uncharted waters; capacity utilization rates, as conventionally
measured, are unusually low by post-war standards, and there has been a period of
unusuallylarge relativeprice movements anddisturbances totheworld economy. This
2. SeeCommuniqué, PRESS/A(83)25.
makes extrapolation from the past perilous. Nonetheless, ifexperience is a guide it is
unlikelythatrecoverywill beledbybusiness investment. TheGDPcomponentswhich
havemostfrequentlyled total demandoutofmajorcyclical troughs havebeenprivate
consumption and residential investment. Spending on machinery and equipment has
usually lagged, particularly in North America3.
Typicallyitishouseholdspendingwhichleadsthebusinesscycle.Ascreditdemand
slackens, the ensuing fall in interest rates stimulates spending on dwellings and
consumer durables. At the same time, decelerating inflation boosts real personal
disposable income and real financial balances, stimulating housing and consumption
demand. Lowerinterestratesthemselveshaveseldommovedfixedinvestmentspending
atanearlystageofeconomicrecovery.Spendingonmachineryandequipmenttypically
risesoncecapacityutilization increases, inventory-to-salesratios fall,and expectations
about the durability of the economic upturn become more confidently held.
Although business investment is unlikely to lead the upturn it is desirable that
investment should recover as rapidly as possible, to levels that permit growth to be
sustainableoverthemedium term, withoutbottlenecksand inflation. Overall,capacity
utilization rates appear low. However, accelerated scrapping of capital during the
recessionfollowingtheoil-priceshocksandotherlargerelativepricechangesmaycause
capacityconstraintstoariseatarelativelyearlystageintheupturn,considerablybefore
unemploymentis reduced to acceptablelevels. Hence while the recovery probably will
notbeinvestment-led, itneedsto beinvestment-fed,inthesensethatinvestment needs
to strengthen relatively early so as to become a vigorous and dynamic component of
growth over the medium term.
Suchapick-upin investment is, however, bynomeans assured. Ahigh and rising
levelofinvestmentrequiresbuoyantbusinessconfidence;overthelastfewyearsthishas
generallybeenatalowebb,althoughmorerecentlyconfidencehaspickedup,spurredin
partbytheprospectofrisingsales.Stronggrowthofproductiveinvestmentalsorunsthe
riskofbeinginhibitedbyhighrealinterestrates,notonlybecauseofhighfinancingcosts
but also becauseofthe relative attractiveness ofacquiringfinancial assets. Hence it is
important that confidence should be maintained and that interest rates should ease;
otherwise the investment pick-up, once it comes, may be killed in its infancy.
Concernalsocentresontheprofitabilityofinvestment.Inmanycountriestheshare
ofreal national income going to profits has declined, especially when there have been
adverse terms-of-trade movements. One element has been the growth of non-wage
labour costs. Since the second oil shock there has been some evidence of greater
flexibility in the growth of nominal wages, owing in part, presumably, to higher
unemployment,aswellastoalesseningofwageindexationarrangementsinanumberof
countries. However, stagnant output, weak productivity growth and strong price
competition have meant that wage moderation has not been accompanied by a
significantly improved share of non-wage incomes.
Evenmorestrikinghasbeenthesharpdropinrealizedratesofreturn,measuredas
theratioofgrossoperatingsurplustogrosscapitalstock. Forexample,takingsixofthe
largestOECD countries asa group,realizedratesofreturn in manufacturingfellfrom
3. Forfurtherdiscussion, seethe section "Main Features ofthe Projections", especiallyTable 6.
9