OECD economic outlook. 34.

176 Pages·1983·23.18 MB·English

by  OECD

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ORGAN ECONOMIC COOPERAT DEVELOPMENT
OECD
ECONOMIC
OUTLOOK
ORGANISAT COOPERATION E C 0 N 0 M I Q U E S
DECEMBER 1983
OECD ECONOMIC OUTLOOK, No. 34
December 1983
ERRATUM
The three last paragraphs ofthe section on short termprospects
are missingfrom the end ofthe note on Germany on page 86. The
section is reprinted here infull with the missingparagraphs.
Prospects unusuallymodestrecovery, andunlikelytostoptherise
in unemployment.
Realprivateconsumptionisprojectedtopickupafter
Exportmarkets started to grow again in thefirst half the drop in the third quarter of 1983, but is likely to
of 1983, and this is projectedto accelerate through the weaken again in the second halfof 1984 when various
forecastperiod,toaverage4percentin 1984. Germany budget measures will combine to damp disposable
seemstohavelostexportmarketsharesinlate 1982and incomes of households. The expansion of household
up to early 1983, probably reflecting a deterioration in incomes is likely to accelerate in 1984, as the deceler¬
international competitiveness since 1981. But favour¬ ating fall in employment entails faster growth of
abledomesticcost andprice trends as well as exchange compensationofemployees, andincomes fromproperty
rate developments led to a marked improvement in and entrepreneurship are likelyto growstrongly. How¬
competitiveness through 1983. Under the technical ever, with rising fiscal drag and inflation, disposable
assumption of constant exchange rates this is likely to income of households seems unlikely to grow in real
continue. Hence,exportscanbeexpected togrow more terms. Hence, any increase in real consumer demand
than markets in the period ahead. The projections willprobablydependonafurtherfallinthesavingratio.
embody an increase of exports of goods and services Theprojected modestexpansionofprivateconsumption
(volume) by almost 5 per cent on the average of 1984 impliesadeclineinthesavingratiotoalevel wellbelow
and a further acceleration in thefirst halfof 1985. The thatreachedintherecoveryofthemid-1970s.Growthof
monetary authorities are expected to continue their realfixedcapitalformationis likelyto haveaccelerated
presentstanceofpolicy.AssumingCBMgrowthof6 per in the second half of 1983, mainly reflecting stronger
centthroughtheprojectionperiod,areneweddeclinein constructioninvestment,butisunlikelytomaintainthis
interest rates seems possible in the course of 1984, but growthrateduring 1984whenthestimulusprovidedby
interestrates maypickupagain later, mainlyreflecting government incentives will probably peter out. The
the projected rise in United States rates. Given the latest Ifo investment survey confirms that a cyclical
authorities' commitmentto budget consolidation, fiscal recovery of investment is not yet under way and
policy is assumed to continue to restrain activity. industrial enterprises have revised their investment
plans downwards. Given the modest outlook for
With the stimulative effect of government measures domestic demand they do not intend to expand capital
on investment weakening and growth of consumer spending in real terms, despite expecting a strong
demand limited by the damping fiscal impact on increase in foreign demand. Hence, on the average of
householdincomes,theexpansionofdomesticdemandis 1984, investmentin machinery and equipment is likely
projected to weaken after the marked recovery in the to grow less than in 1983. Construction investment, on
firsthalfof 1983,andtocontinueatonlya modestpace the other hand, should rise more on the average ofthe
up to 1985. The projected improvement in the real year. In particular, the growth of residential construc¬
foreignbalanceduetoacceleratingexportdemandmay tion is projected to be strong, given the sharp rise in
justsufficetokeepthegrowthrateofrealGNPatabout orders. The increase in real building investment will
2percent, with somefluctuationsreflectingthecompo¬ continueto becurbed by publicinvestment, which may
sition of demand. By past standards, this would be an stopfalling but is unlikely to exceed greatly its level in
1983.Withthestock/outputratiowellabovetrend,only remainbroadlyunchanged,witharisingtrend,however,
limitedfurtherstimuluscanbeexpectedfromabuild-up in late 1984 and into 1985.
ininventories.Theprojectionsimplya broadlyconstant Ofthe various uncertainties surrounding the projec¬
stock/output ratio over the next twelve to eighteen tions,thistimeforeigndemandprospectsseemthemost
months. important. Given Germany's reliance on OPEC and
Although labour productivity growth is projected to developing country markets, the recovery of import
decelerateafterthestrongincreaseintheearlyphaseof demand from these areas is crucial for the projected
therecovery,employmentseemslikelytocontinuetofall recovery of exports. Also, the technical assumption of
slightly, given the modest expansion ofoutput. Unem¬ constant exchange rates may this time be more proble¬
ploymentis thereforeprojectedtorise further. The rise maticthanusual,giventhestrengthoftheUnitedStates
in productivity should largely compensate for wage dollaratthetime theprojections were made. Consider¬
increases. Unit labourcosts may pickup only modestly abledownsiderisks alsoexiston thedomesticside. The
in the course of 1984 and into 1985, assuming a slight fallinthesavingratiomayendearlierthansuggestedin
acceleration inthegrowthofwages. Inflation neverthe¬ the projections and indeed, the deterioration of con¬
lessisprojectedtoincreasesomewhatduetothemarked sumer confidence in mid-1983 could point in this
pickupinimportpricesin 1983.Withimportedinflation direction. The stock/output ratio could fall back to its
expectedto slowdown in 1984, and moderatedomestic trend in thecourse oftheupswing. According to recent
costandpricetrends,inflationmayfluctuatearoundthe surveys, capital spending may be rather weaker than
3 percentrate. Deterioratingtermsoftradearelikelyto projected. Higher than assumed interest rates, which
offset the improvement in the real foreign balance, so might result from international developments, would
that the current accountsurplus in 1984 is expected to also adversely affect investment.
OECD
ECONOMIC
OUTLOOK
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DECEMBER 1983"
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 and December.
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 of the Organisation designed to assist the interpretation of
economictrends. Referencestatisticsareincluded. TheFrenchversionoftheOECD Economic
Outlook 15* 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)
wassetupunderaConventionsignedinParison 14thDecember, 1960, whichprovidesthatthe
OECD shallpromotepolicies designed:
- toachievethehighestsustainableeconomicgrowthandemploymentandarisingstandardof
livingin Membercountries, whilemaintainingfinancialstability, andthustocontribute to
the development ofthe world economy;
- tocontribute tosoundeconomicexpansion inMemberaswellas non-membercountries in
theprocess ofeconomic development;
- tocontributetotheexpansionofworldtradeona multilateral, 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 UnitedStates.
*
* *
© 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
STRENGTHENING THE RECOVERY
DOMESTIC AND INTERNATIONAL DEVELOPMENTS 15
Main Features of the Projections 15
Monetary and Fiscal Policies 23
Structural Budget Deficits and Government Claims on Private Savings 38
Labour Markets 44
Wages, Costs and Prices 49
Foreign Trade and Current Balances 58
International Monetary Developments 65
DEVELOPMENTS IN INDIVIDUAL COUNTRIES 70
United States 70 Austria 105 Netherlands 110
Japan 78 Belgium 105 New Zealand 111
Germany 82 Denmark 106 Norway 112
France 87 Finland 107 Portugal 113
United Kingdom 92 Greece 108 Spain 114
Italy 96 Iceland 108 Sweden 115
Canada 100 Ireland 109 Switzerland 115
Australia 104 Luxembourg 110 Turkey 116
TECHNICAL ANNEX 117
Detailed Supporting Tables and Charts 117
Technical Notes 140
Sources and Methods 145
Reference Statistics 151
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 NUMBERED TABLES
Table Page Table Page
1 Growth ofreal GNP in the OECD area 18 43 TradebalancesofmajorOECDcountriesandcountry
2 Growth ofreal GDP in other OECD countries 19 groups 122
3 Development of real total domestic demand in the 44 Trade balancesofotherOECD countries 122
OECD area 19 45 Current invisible transactions ofmajor OECD coun¬
4 Growth ofnominal GNP in theOECD area 20 tries and country groups 122
5 Contributions tochanges in real GNP/GDP 21 46 Current balances ofOECD countries (percentage of
6 Monetary aggregates: recent trends and targets 24 GDP) 123
7 Interest ratechanges in majorOECD countries 28 47 Market prices of selected primary commodities
8 Latest fiscal policy announcements 32 exported bydeveloping countries 123
9 Generalgovernmentfinancial balances 33 48 Competitivepositions 124
10 Discretionary and automatic changes in general 49 Summaryofbalanceofpaymentsoncurrentaccount
government financial balances 34 oftheOECD area and other major world groupings 125
11 General governmentexpenditureand taxation trends 50 Trade in manufactured goods: export market growth
in the OECD area 36 and relative export performance 125
12 Sectoral financial balances 42 51 Tradeofnon-oil developingcountries 126
13 Public sector claims on private savings and govern¬ 52 Balanceofpayments ofnon-oil developingcountries 126
ment indebtedness 43 53 OPEC's balanceofpaymentson current account 126
14 Employment and productivity 44 54 Netimportsofoil 127
15 Unemployment in the OECD area 45 55 OECD countries' exports toOPEC 127
16 Unemployment rates in otherOECDcountries 45 56 Eastern countries' current balance 128
17 Youth unemployment in selected OECD countries 46 57 OECD countries' exports to the Soviet Union and
18 Labourmarket dispersion forOECD area 46 Eastern Europe 128
19 Hourlyearnings in manufacturing 51 58 OECDcountries' importsfrom theSoviet Union and
20 Unitlabourcosts in manufacturing 52 Eastern Europe 129
21 Consumerprices 55 59 OECDcountries'exportstoChinaandselectedAsian
22 Privateconsumption deflators in the OECDarea 57 countries 129
23 GNPdeflators in theOECD area 57 60 OECD countries' imports from China and selected
24 World trade summary 59 Asian countries 130
25 Analysisoftradebalancechangesfrom 1982to 1985 61 Total world invisibles balances 140
first half 62 62 Oil market indicators 143
26 Current balances of major OECD countries and 63 Oil market conditions 144
countrygroups 63
27 Current balances ofotherOECD countries 63
RREEFFIERENCESTATISTICS
Rl Growth of real GDP at market prices in the OECD
TECHNICALANNEX area 152
R2 Growth of real GNP/GDP - Seven major OECD
28 Comparison of private consumption deflators and countries (half-yearlyfigures) 153
GNP/GDP deflators 117 R3 Gross fixed capital formation as percentageofGDP 154
29 Exchange rates ofOECDcountries 117 R4 Gross savingas percentage ofGDP 155
30 EffectiveexchangeratechangesofOECD countries 118 R5 Surplus on current transactions with the rest of the
31 Volume of imports of major OECD countries and world as percentageofGDP 156
country groups 118 R6 Governmentfinalconsumptionexpenditureaspercen¬
32 Volume of exports of major OECD countries and tageofGDP 157
countrygroups 118 R7 Currentdisbursementsofgovernmentaspercentageof
33 ForeigntradevolumesofselectedotherOECDcoun¬ GDP 158
tries 119 R8 Total outlays ofgovernment as percentage ofGDP 159
34 Foreigntradeprices(averagevalues)ofmajorOECD R9 Current receipts of government as percentage of
countriesand country groups 119 GDP 160
35 Foreigntradeprices(averagevalues)ofselectedother RIO Consumerprices 161
OECD countries 119 Rll Consumerprices (half-yearly figures) 162
36 Commodity trade forecasts: United States 119 R12 Standardized unemployment rates in fifteen OECD
37 Commoditytrade forecasts: Japan 120 countries 163
38 Commoditytradeforecasts: Germany 120 R13 Current balances 164
39 Commoditytrade forecasts: France 120 R14 Current balances (half-yearly figures) 164
40 Commoditytrade forecasts: United Kingdom 121 R15 Exchangerates,nationalcurrenciesagainsttheUnited
41 Commodity trade forecasts: Italy 121 Statesdollar 165
42 Commodity trade forecasts: Canada 121 R16 Effective exchange rates 165
LIST OF CHARTS
Chart Page Chart Page
A Leading indicators and industrial production 16 N United States: balance ofpayments andthedollar 66
B Currentand past cyclical recovery phases 17 O UnitedStates:exchangeratesandshortterminterest
C Industrial production and non-oilcommodity prices 20 differentials 68
D Monetary and fiscal policy indicators 25
E Monetarygrowth and interest rate trends 26 TECHNICALANNEX
F Real interestrates 30
G Generalgovernmentstructuralbudgetbalances, with P Industrialoutput,foreigntradeandcurrentbalancein
inflation adjustment 40 majorseven OECD countries 131
H Labourmarket indicators 47 Q Effectiveexchange ratesofOECD currencies: recent
I Indexofnon-oil commodity prices in terms ofSDRs 49 developments 135
J Wages, prices and profits 53 R Dollar exchange rates of OECD currencies: recent
K Profits, ratesofreturn and investmentinmanufactu¬ developments 138
ring 54 S Exchange rate of major currencies against the
L Changes in consumer prices 56 dollar 139
M Measuresofrelative competitiveposition 60 T Total world invisibles 141
OECD ECONOMIC OUTLOOK
NOW AVAILABLE ON MAGNETIC TAPE
The data ofthe December 1983 Economic Outlookare also available, in level form, on
magnetic tape. The Economic Outlook tape provides some 1,200 macroeconomic statistics
forecast in the Outlook, together with historical values.
The Economic Outlook tape can function as a fully-documented data bank, with time
series featuring both historical and forecast components. These historical data, which are
presented over a muchlongertimeperiodthan is normallypublished in theprinted Outlook,
also facilitate the comparison of medium-term trends with forecast values.
All series arefully-documented inmachine-readableform onthetape itself, sousers can
rapidly compute ratios and relative performance, produce charts, and use the Outlook
forecasts as inputs into other projections.
(For further information contact the Data Dissemination Unit, DPSSD/OECD.)

Strengthening the Recovery
Recent trends Activity is now increasing in nearly all OECD countries. Over the last twelve
and prospects months,OECDgrowthappearstohavebeenabout3-/2 percent,nearly 1 percentfaster
than had earlier seemed likely. Growth expected during 1984, and into 1985, is much
thesameasprojectedsixmonthsago,sothatunemploymentintheOECDeconomyasa
whole may stabilize around its present rate of 9 per cent ofthe labour force. Average
inflation may remain below 6 per cent in 1984, a little lower than expected earlier.
Within the OECD economy there is however likely to be considerable diversity.
RecoveryiswellunderwayintheUnitedStates,andJapantooislookingmorebuoyant.
Bymid-1985 realGNPinNorthAmericaandJapanmaybe7to9 percenthigherthan
two years earlier. Recovery in Europe seems likely to be more modest, however, and
perhaps also more fragile. By mid-1985 activity there may be some 3 per cent higher
than two years earlier. Reflecting these developments, unemployment in the United
States seems likely tocontinue falling: from a peakrate of 10.3 percent in the second
halfof 1982, it may be under 8 per cent by the end of 1984. In Japan, unemployment
may show little change, butin Europesomefurtherriseseems likely, to reach perhaps
12per cent in the first half of 1985. (For further details, see Main Features of the
Projections and subsequent sections).
Preconditions for a Establishing conditions favourable to renewed growth, and to sustaining it
sustained recovery thereafter, has been the main thrustofpolicy in the majority ofOECD countries over
thelast three orfouryears. As background toconsideration ofprospects and policies a
certain amount of retrospect is therefore useful.
Considerable progress has been achieved in establishing preconditions for
sustained growth of output and employment:
Inflation has come down sharply. From a year-on-year peak of 13.6 per cent in
early 1980, the most recent OECD rate-over the year to October-was 5.2per
cent, aratelastseen intheearly 1970s; inthethree largesteconomies, theUnited
States, Japan and Germany, inflation was down to 3 per cent or lower. However,
with rates close to or above 10 per cent in a number ofcountries -including two
major ones- inflation differentials among OECD countries remain wide. (See
section on Wages, Costs and Prices.)