§ Mr. Gouldasked the Chancellor of the Exchequer why imports of manufactures have increased faster than exports if relative normal unit labour costs have fallen by up to 17.6 per cent. compared with 1970 since the third quarter of 1976.
§ Mr. Robert SheldonIt is not easy to explain recent movements in exports and imports by reference either to movements in competitiveness or to the other factors which are normally thought to influence them, such as the growth in world trade, the level of activity in the United Kingdom and the level of capacity utilisation. This is true whether relative cost or relative prices are used as the measure of competitiveness. Research has indicated that export and import volumes are affected by changes in competitiveness only after considerable lags—longer in the case of exports than of imports—and it seems implausible, for instance, to ascribe either the whole of the rapid growth in exports in the first half of 1977 to the improvement in competitiveness in the fourth quarter of 1976, or the whole of the relatively poorer performance since then to the appreciation of sterling during 1977; to do so would be to imply very short lags.
§ Mr. Gouldasked the Chancellor of the Exchequer (1) what has been the percentage increase in new export orders 759W for the mechanical engineering industry in each quarter since 1963; what has been the percentage change in relative export prices for manufactures; what is the estimated time lag between the change in price and the change in orders; and what is the degree of correlation between the two;
(2) what has been the percentage increase in new export orders for the mechanical engineering industry in each quarter since 1963; what has been the corresponding increase in world trade in manufactures; and what is the degree of correlation between the two.
§ Mr. CryerI have been asked to reply.
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PERCENTAGE CHANGE ON PREVIOUS QUARTER IN:— Period New export orders for mechanical engineering Relative export prices for manufactures Export of manufactures by main manufacturing countries (1) (2) (3) 1970— 2nd quarter … -12 0 +3 3rd quarter … -10 +1 0 4th quarter … +11 +1 +4 1971— 1st quarter … -4 +1 +2 2nd quarter … -10 0 0 3rd quarter … -5 +1 +5 4th quarter … -1 +2 -4 1972— 1st quarter … +32 +1 +5 2nd quarter … -22 0 0 3rd quarter … +4 -4 0 4th quarter … +22 -4 +9 1973— 1st quarter … +5 0 +3 2nd quarter … +19 0 0 3rd quarter … +9 -7 +4 4th quarter … +1 0 +4 1974— 1st quarter … +4 +1 +4 2nd quarter … -13 +2 +1 3rd quarter … -27 0 +2 4th quarter … +12 0 -1 1975— 1st quarter … 0 0 -7 2nd quarter … -17 +2 -1 3rd quarter … -8 +1 +1 4th quarter … +10 +1 +6 1976*— 1st quarter … +12 +2 +3 2nd quarter … -7 -5 +1 3rd quarter … +7 +1 +2 4th quarter … +28 -5 +2 1977*— 1st quarter … -3 +7 0 2nd quarter … +1 +1 -1 3rd quarter … -14 N/A +2 * Provisional. N/A=Not available. The figures so far as they are available on a consistent basis are shown in the table from 1970. They are subject to revision, especially those for new orders. Price movements are not the only determinants of changes in new orders and no significant correlation or fixed time lag has been found between the percentage changes in prices and in new orders. A positive correlation of 0.34 was found between the figures in columns (1) and (3) of the table, suggesting a moderate statistical association—but not necessarily a casual one—between quarterly percentage changes in world trade in manufactures and in new export orders received.
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§ Mr. Gouldasked the Chancellor of the Exchequer what are the relative prices in table I of the Economic Progress Report for July 1977 in terms of the current market rate of exchange.
§ Mr. GoldingI have been asked to reply.
The estimates for October 1975, which were based on an extensive direct comparison of price levels between capital cities, can be updated on an approximate basis by taking account of changes in the overall national consumer price indices for each country and also of changes in market exchange rates. Following are estimates for October 1977 derived in this way:
Relative prices in capital cities of the EEC (London=100) Bonn … … … 139 Paris … … … 127 Rome … … … 97 Amsterdam … … … 132 Brussels … … … 137 Luxembourg … … … 125 Dublin … … … 101* Copenhagen … … … 163 * (for August 1977)