§ Mr. Gouldasked the Chancellor of the Exchequer what degree of depreciation of £ sterling would be required to reduce the terms of trade index to the figure established in 1974.
§ Mr. Robert SheldonThe terms of trade in the second quarter of this year were some 7 per cent. more favourable
1974 Second quarter = 100 Relative Export Prices† Relative Export Profitability‡ Import Price Competitiveness§ 1975— First quarter … … 100.4 101.8 103.2 Second quarter … … 102.1 101.9 101.8 Third quarter … … 103.4 100.9 99.8 Fourth quarter … … 104.6 99.8 98.6 1976— First quarter … … 106.2* 99.8 99.2 Second quarter … … 101.0* 96.6 93.6 Third quarter … … 102.0* 95. 0 92.2 Fourth quarter … … 96.9* 93.9 92.4 1977— First quarter … … 104.1* 94.4 94.8 Second quarter … … 104.1* 96.2 96.9 * Estimates, subject to revision. † United Kingdom Export Prices (manufacturing). Competitors Export Prices (manufacturing). ‡United Kingdom Wholesale Prices (manufacturing excluding food) United Kingdom Export Prices (manufacturing) § United Kingdom Wholesale Prices (manufacturing excluding food) United Kingdom Import Prices (finished manufacturing) The figures for relative export prices are particularly subject to revision, as they have to be based in part on forecasts rather than on outturn statistics. They have been included in the table in order to give a more complete picture of recent developments in competitiveness and to illustrate the wide divergence between the movements of different indicators.
§ Mr. Gouldasked the Chancellor of the Exchequer what were the terms of trade in each quarter since the beginning of 1974; and what effect the charge since 1974 has had on the rate of inflation.
§ Mr. Robert SheldonThe United Kingdom terms of trade are published inEconomic Trends for June 1977 and in "Monthly review of external trade 268W than they were on average during 1974. The depreciation of sterling necessary to offset that improvement would probably need to be greater than 7 per cent. Import prices in sterling do not necessarily increase by the full amount of a depreciation and sterling export prices would probably tend to rise.
§ Mr. Gouldasked the Chancellor of the Exchequer what was the Index of Competitiveness in each quarter from the beginning of 1975 to date as a percentage of the index ended 30th June 1974; and if he will make a statement on the present competitiveness of British manufacturers in the light of these figures.
§ Mr. Robert SheldonThere is no one index of competitiveness. The three indices given below taken together give an indication of our competitive position.
statistics", both of which are available in the Library. During 1974 import prices rose very rapidly, and the consequences included both an increase in domestic inflation and an adverse movement in the terms of trade. Since 1974 the rate of increase of import prices has moderated and the terms of trade have recovered some of the loss sustained in that year. If this recovery had been prevented by further increases in import prices rather than lower export prices the consequences would very likely have included a faster rate of domestic inflation than in fact took place.