^{note (1) page 4} The income estimate showed a negligible fall, output a drop of less than 1 per cent, while the expenditure measure suggested a decline of over 2 3/4 per cent. The compromise measure of GDP shown in table 1 incorporates a smoothing of the lumpy investment change between the last quarter of 1968 and the first quarter of this.

^{note (2) page 4} The preliminary estimate of consumers' expenditure in the second quarter now published by the Central Statistical Office showed a rise of nearly £50 million (1963 prices) on the first quarter figure of £5,612 million. Our own estimate, using some later data—in particular, the June figures of retail sales—indicates only a slightly less buoyant level than this (see table 1 and, for details of the estimated components, Statistical Appendix table 9).

^{note (1) page 6} The new figures quoted here are those given in table 1, which are identical with the ‘smoothed ‘figures indicated in parentheses in table 2. Further references in this section are to the unsmoothed data given in table 2. The smoothing is a rough attempt to discount for the effect of the switching in investment expenditures from the first quarter of this year to the last half of last year, which in total we estimate at £60 million (1963 prices).

^{note (2) page 6} The sum of the figures for the third and fourth quarters of last year and the first quarter of this year is close to the figure we gave in May, and the sum for the two years together —1968 and 1969—is almost exactly the same now as we suggested in May.

^{note (3) page 6} See National Institute Economic Review no. 48, May 1969, page 15.

^{note (4) page 6} But, again because of the more pronounced switching effect which is now apparent, the predicted actual growth rate for this year has been reduced from nearly 8 to 4 1/2 per cent. The lower average level of investment envisaged for this year—because of the switching effect—is also partly responsi ble for the positive growth of 2 1/2 per cent we now expect for 1970 (as compared with the fall of 3 per cent which we suggested in May).

^{note (1) page 8} A more extended account of both these factors is given in Chapter II; for comments on the French devaluation see pages 30-32.

^{note (2) page 8} A minor point concerns the quarterly course of exports. The figures represent our anticipation of published figures, and the published series includes adjustments which patently take inadequate account of the present seasonality of diamond exports. We have commented before (see National Institute Economic Review no. 47, February 1969, page 51) on this anomaly which has the effect of inflating the first and third quarter figures and depressing those for the second and fourth quarters.

^{note (3) page 8} This increase alone was sufficient to invalidate our earlier (May) expectations for the year-on-year rise in the wage and salary bill.

^{note (4) page 8} This represents a modification of the view we put in May and earlier (see National Institute Economic Review no. 47, February 1969, page 21 and no. 48, May 1969, pages 9-10), when we argued strongly for the view that cost increases from 1968 would have a delayed effect. Further experiment ation with price equations has suggested to us that this effect, though not absent, will not be so strong as previously assumed. The level of the price index already reflects the restrictions of last November and to some extent this year's budget; thus, although the rise from now on is likely to be modest, the year-on-year rises are much more substantial.

^{note (1) page 9} The arithmetic of the year-on-year increases again gives a rather distorted view of the forecast; for it shows a much higher rate of growth in consumer spending next year than this.

^{note (1) page 10} The travel allowance, on the other hand, is assumed to remain on at its current value.

^{note (1) page 11} Our own experiments with alternative methods of seasonal adjustment have not yielded significantly different movements, although they do smooth out the peakiness in the official figures.

^{note (2) page 11} Since this was written, the mid-August figures have been published. These show a further, but more restrained, increase in the numbers unemployed (after seasonal adjustment); and vacancies, instead of continuing to decline, turned up.

^{note (1) page 12} The OECD estimate for the current balance in the first half-year, taking no credit for under-recorded exports and including payments for US military aircraft is of a deficit of £63 million; our comparable figure is a deficit of £26 million.

^{note (1) page 13} The deposit scheme is thought of as reducing imports in 1969 by over £100 million, about a half of which (rather more than we were suggesting earlier) would be a purely temporary effect associated with anticipation of the removal of the scheme at the end of the year. The faulty adjustment for diamonds inflates the figures for the first and third quarters, and depresses those for the second and fourth quarters by about £6 million.

^{note (1) page 14} Specifically, this involves United States official stockpile policy in certain respects, the effects of the American dock strike and the replenishment of stock holdings previously run down in (mostly unrealised) anticipation of falling prices.

^{note (2) page 14} These are the Board of Trade unit value indices which are different from the balance-of-payments average value indices shown in table 6, into which they have been translated.

^{note (1) page 15} Over and above the fact that the discovery itself will no doubt have favourable confidence effects on the short-term capital position (both recorded and unrecorded).

^{note (2) page 15} Central Statistical Office, United Kingdom balance of payments 1968, page 73.

^{note (3) page 15} The second half of 1967 was abnormal because of the dock strike.

^{note (4) page 15} A figure of this order has been officially suggested. See Hansard (House of Commons Debates) 23 June, Written Answers col. 219.

^{note (5) page 15} Assuming long-term capital then at -£150 million and the ‘normal’ balancing item at +£20 million.