Economic Outlook 1981–1985: The London Business School with Gower Publishing

The contrast between the "real" and the "financial" economy is acutely illustrated by the latest indicators. On the one hand industrial production fell I 'A per cent in June to the levels of a year ago and manufacturing industry recorded its worst month in 15 years. On the other hand developments on the financial side of the economy remain encouraging. Interest rates have fallen steadily since last October, public borrowing is under control, the money supply - on whatever measure - has been expanding within its target range and the exchange rate is firm against the average of all other currencies. Reflecting these developments, inflation is also improving rapidly. Retail prices were unchanged in July and 8.7 per cent higher than a year earlier - the best outturn since 1978. Ministers are now confident that their year-end forecast of 9 per cent will easily be beaten, and that an outturn of 7 1/2 per cent is possible.