Only if the underlying upward trend in exports continues is output this year likely to do better than recover its loss in the second half of last year. This review of the economic situation begins in the first section with exports so far, the world economic situation and exports prospects. The second section deals with home demand and output. The third section sums up the outlook for the economy and the balance of payments.

Throughout this article the word ‘research’ is, for convenience, used as short-hand for ‘research and development’—except in one or two instances where the context makes clear that development costs are being discussed separately. The comparison is restricted to manufacturing industry, and excludes capital expenditure.

Exports of primary producing countries have for some time been rising more slowly than incomes in industrial countries. A previous article discussed why their exports of industrial materials had lagged behind; this article deals with their exports of food to industrial countries (chart 1).

The Ministry of Labour has recently introduced a new index of retail prices using a method rather different to that of earlier indices. This is the index that is usually used in wage and salary negotiations. This note gives a brief explanation of the change.