The British economy [May 1987]

The improvements in output, employment and unemployment, appear to be continuing. The growth in consumer spending may be beginning to slacken, although in view of the underlying buoyancy in its key determinants and the eventual effects of the Budget changes, this judgement may be a little premature. Investment is expected to rise substantially above 1986 levels by the end of the year. Exports appear also to be on a rising trend. The main cause for concern over the coming months is whether Britain's domestic supply capacity can accommodate a sustained increase in aggregate demand and whether lower interest rates will add to domestic demand pressures in a situation when monetary conditions are already relatively lax