§ The position we have now reached is one where there is substantial underemployment of resources, but where costs 469 have been held stable in relation to those of our competitors. A projection of the existing trends can give us some indication of where our economy would be heading if no changes were made in the Budget, though there are inevitably great uncertainties about any such projections.
§ The prospects for world trade as a whole are that it will increase at a much slower pace in 1963 than in recent years. This is bound to be reflected in our exports of goods over the year. Exports of services have been doing rather better lately and may continue to do well in 1963.
§ At home, fixed investment, which, broadly speaking, has been running nearly level in total in the last twelve months, may begin to grow again in the course of the year. Within the total, public sector expenditure has been rising and the rise is likely to accelerate; in the private sector the fall in investment in manufacturing seems likely to continue but may slow down, while in housing and some of the service industries there could be a change to a definitely rising trend.
§ The construction industries are likely to be very heavily loaded this year, in consequence of the increases in public investment already announced, and the load will, of course, be further increased for a good many months to come by the backlog of work delayed in the winter.
§ Real personal incomes have been rising, though less in 1962 than was originally expected, and some further rise could reasonably be looked for in the year to come without any more tax changes being made today. Increased National Insurance benefits and the reduction of prices through lower Purchase Tax play a part here. With rising personal income there should be a moderate growth of personal consumption.
§ Public consumption, in real terms, has risen in the last two years at a rate of about 4 per cent. a year, and must be expected to continue rising at about the same rate. The forecast of trend is, of course, consistent with the picture presented by the Estimates, to which I shall refer in more detail later.
§ Finally, there is the element, always a very difficult one to forecast, of investment in stocks. We have recently had a fairly low rate of stock accumulation, 470 and it would seem reasonable to allow for an increase rather than a decrease during the coming year. But there is no reason to think that the present ratio between stocks and output is such as to call for a large-scale stock accumulation.
§ The outlook for demand as a whole suggests that there will be a rise in national output this year, but it would be unlikely to reach 4 per cent. over the whole year, nor would it be as vigorous as our economy can sustain. I repeat that this is a forecast of what would happen if there were no changes in the Budget.