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Chapter I. The Home Economy

The rebasing of the constant price national accounts to 1975 prices has been too recent to allow the re-estimation of our econometric model. Thus, with the exception of output, imports and exports (where we used 1975 prices to reweight the forecasts for oil and for all other goods taken together), the constant price forecasts presented here were constructed in terms of 1970 prices and subsequently linked to the new, 1975-based, data. This method can take account of the effect of rebasing on the relative weights of different categories of demand (up to our normal level of disaggregation) and thus on their contribution to total growth, but not of changes in the behaviour of the individual components because of the effects of rebasing within them. Our preliminary examination of the new data suggests that the latter effects may be large. It will thus be inappropriate to compare the present forecasts in detail with CSO data on the new base for the future as these appear. We believe that the forecasts provide the best overall picture of likely developments in the economy that can be made at present, but the caveat at the head of the tables applies with especial force on this occasion.