§ When I presented my last Budget, the world economy was in the trough of the deepest recession since the war. In the first half of last year the gross national product of the eight largest OECD countries outside the United Kingdom fell by 5 per cent. at an annual rate, and world trade fell by even more—around 14 per cent. at an annual rate. Unemployment in the industrial countries was rising to levels unknown since the War. At the same time, most countries' rates of inflation remained well into double figures.
§ I then predicted that a recovery in the world economy would be under way by about the turn of the year. In fact, the turning point came sooner. The United States economy recovered strongly in the third quarter. In the fourth quarter most 233 of the main European economies, especially Germany, began to pick up. It is too early to be sure, but the rise in GNP in the industrialised countries in the second half of last year probably came close to reversing the fall in the first half.
§ Similarly with world trade: the rise in import volumes in the fourth quarter of last year probably came close to offsetting the falls seen at the beginning of the year.
§ Although this recovery in world output and trade must owe a lot to a turn-round in stockbuilding, we expect it to be sustained through the coming year. Private fixed investment may remain generally rather weak for the time being. But private consumption, in particular—I am talking of the world as a whole—is likely to rise quite strongly, as the rate of inflation moderates and the full effects of last year's tax cuts and credit relaxations are felt. In addition, stock-building should continue to contribute to world recovery this year, and public spending will continue to be boosted by the accelerated programmes of public works announced in many countries last year.