§ In the first half of 1962, there was a brisk rise in demand and output. Exports rose by 5 per cent. between the fourth quarter of 1961 and the second quarter of 1962, and industrial production by the middle of the year had more than regained the ground lost in the second half of 1961. At the same time, the action taken in July, 1961, had secured a substantial improvement in our balance of payments and there was no doubt that the economy was more competitive and costs more firmly under control than they had been for some time.
§ In the second half of the year the trend changed. There was a slowing down of the growth of world production and trade. This reflected itself in our exports, which stopped rising, thus removing the main force which had been supporting the increase in activity at home. Unemployment, which had not fallen with the increase in production in the first half of the year, began to rise at a much faster rate, and it seems likely that continuing pressure on costs and prices led manufacturers to greater economy in the use of manpower. Finally, the severe winter after Christmas led to a very large addition to the total of unemployed.
§ In the autumn and winter a number of measures were introduced both to relax restriction of credit and to stimulate the economy. Some of these measures, such as the release of post-war credits and the substantial Purchase Tax cuts, are already taking effect, as can be seen particularly in the demand for motor cars. Others, such as the improvement in the capital allowances, take longer to produce their full effect.