Skip to main content

International Monetary Fund (Index Of Relative Unit Costs)

Volume 987: debated on Thursday 3 July 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

asked the Chancellor of the Exchequer, further to his reply dated 20 May concerning the International Monetary Fund index of relative unit costs, whether in making use of the index his Department has regard to the assumption concerning productivity; and if he will provide figures showing to what extent the assumptions concerning the United Kingdom have been substantiated since the index was formulated.

For use in forecasting, the Treasury constructs an index of relative normal unit labour costs with a different assumption about trend productivity growth in the United Kingdom. The projections of trend productivity growth used in the IMF's index seem rather high, and its estimate or normal unit labour costs in the United Kingdom correspondingly low. The table below shows the assumptions underlying the IMF index and the one constructed in the Treasury:

PERCENTAGE PER ANNUM INCREASE IN ASSUMED PRODUCTIVITY GROWTH IN MANUFACTURING
IMFTreasury
1976
1977
1978
1979
For some other countries apart from the United Kingdom the IMF's estimates of trend productivity growth diverge from actual productivity growth in recent years. But for the aggregate of United Kingdom competitors the IMF estimates seem to be broadly in line with actual productivity growth.The differences between actual output in manufacturing in the United Kingdom and the IMF's assumptions about potential output are as follows:

Actual output in manufacturing 1967=100Potential output as assumed by IMFPercntage difference
1973123·3122·4-0·1
1974121·2124·1-2·3
1975113·8127·9-11·1
1976115·4131·9-12·5
1977117·2135·6-13·6
1978118·1139·3-15·2
1979118·4143·1-17·3
Recent figures for the IMF's index and for the Treasury index are set out in the table below. The Treasury index differs from the IMF index by using a smaller number of competitor countries and different weights, as well as by using the different assumption about trend United Kingdom productivity growth.

1975 = 100

IMF index

Treasury index

1978—
First quarter94·194·7
Second quarter91·192·5
Third quarter93·493·8
Fourth quarter94·894·9
1979—
First quarter97·9101·3
Second quarter106·1110·9
Third quarter112·2119·1
Fourth quarter108·3118·0
1980—
First quartern.a.131·5