§ Britain's economic performance this year has been encouraging. It is now clear that the recovery started in the first half of 1992, well before sterling's departure from the exchange rate mechanism. GDP has risen for six successive quarters, and in 1993 as a whole, I now expect the economy to grow by about ¾ per cent.
§ Unemployment has fallen since the beginning of the year, at a much earlier stage in the economic cycle than past experience would suggest, and crucially the recovery has been accompanied by continuing low inflation. Underlying inflation has not been lower since 1968, and unit wage costs in manufacturing have actually fallen this year, allowing British industry to establish a durable improvement in our competitiveness.
§ As a result, despite the weakness of activity in the other major European countries, Britain's trading performance over the last year has been excellent. Exports to countries outside the European Union were up by no less than 14 per cent. in the last three months compared with a year ago—a sharp increase in our market share. After the last three difficult years, that performance convincingly demonstrates the strength of British manufacturing today.
§ Continued growth in consumer spending, together with further increases in exports and investment, should bring faster growth in 1994. Economic forecasting is an unreliable art, to which in my opinion far too much 922 importance has been attached in recent years, but on the best judgment I can make, growth next year should be about 2½ per cent.
§ With considerable spare capacity in the economy, inflationary pressures remain subdued. The tax measures announced in March, and the further measures I shall be announcing today, will push inflation up a little in the next few months, but this should not feed through into higher inflation over the medium term.
§ I expect underlying inflation to remain inside 'the Government's 1 to 4 per cent. target range over the year ahead, and to decline steadily into the lower half of that range by the end of this Parliament. Monetary policy will continue to be directed towards meeting that objective.
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- MONETARY POLICY 157 words c922
- FUNDING POLICY 137 words