§ Within this world setting the United Kingdom balance of payments has continued in deficit. Inevitably there was an initial adverse effect after devaluation. Improvement has occurred—although later than I had hoped—and the overall 1968 deficit of £458 million masks a striking difference between the two halves of the year. The really bad period was the second half of 1967 and the first half of 1968, each with deficits of more than 994 £400 million. In the second half of 1968 the deficit fell to £31 million. In the third quarter, with large inward capital movements, we had an overall surplus of more than £100 million, although we were in deficit again in the fourth quarter. However, it would be no more sensible to see a change of trend between these two quarters than to suggest—as of course we did not—that we had achieved an underlying rate of surplus of £450 million in the third quarter. Indeed, the overall balance, heavily dependent upon capital transactions, is bound to show erratic movements from quarter to quarter. Although it is vital that capital transactions should not be allowed to frustrate our efforts, it is to the current account that we should devote our main attention. It is certainly the best guide to our current economic performance.
§ The current account improved considerably between the two halves of 1968. It has benefited from a strong rise in our exports and from the high level of our invisible earnings. Both were encouraged by devaluation, the effects of which on our exports have still not been fully seen. In the last three months, exports have been 13–14 per cent. greater in volume than in the summer before devaluation—a rise of 9 per cent. in dollar terms. The visible trade deficit was cut from around £80 million a month in the early months of 1968 to about £40 million a month in the last quarter of that year and the first quarter of this year.
§ The March trade figures, announced this morning, are disappointing, especially after the poor results for February. We all know that the pattern of figures for individual months is variable, and that this can obscure an improving trend. It is necessary to take a somewhat longer view. There has been real progress since a year ago. This is true despite these recent disappointments. The apparent slowing down in exports in recent months may largely be attributable to the distorting effects of the U.S. dock strike. The underlying trend of our exports has remained upwards, and in the next few months we may hope to see our American sales recover again. Thus it is possible to take the view that our trade balance will now again improve rapidly. Nevertheless, these recent 995 figures are disquieting. I regard them as reinforcing the case for measures which I shall shortly be outlining.