XN000022-1977-09-09 — Page 3

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FRIDAY, SEPTEMBER 9, 1977

+THIS IS CONSISTENT WITH THE LEVEL AND COMPOSITION OF ECONOMIC ACTIVITY IN 1977 INASMUCH AS THE REVISED FORECAST FOR IMPORTS OF CONSUMER GOODS IS FOR A 12 PER CENT RATHER THAN A 10 PER CENT INCREASE- AND FOR RAW MATERIALS, WHICH ACCOUNT FOR 44 PER CENT OF TOTAL IMPORTS, THE REVISED FORECAST IS FOR A 5 PER CENT RATHER THAN A 10 PER CENT INCREASE,+ HE SAID.

ON PRICES, MR. HADDON-CAVE SAID THERE WAS AN INCREASE OF 7 PER CENT IN THE FIRST HALF OF 1977 OVER THE FIRST HALF OF 1976.

+ANY FORECAST FOR THE REST OF 1977 IS VERY DEPENDENT ON FUTURE MOVEMENTS IN THE EXCHANGE VALUE OF THE HONG KONG DOLLAR,+ HE SAID.

+BUT I CAN SAY I WOULD BE SURPRISED IF THE AVERAGE INCREASE IN THE CONSUMER PRICE INDEX IN 1977 COMPARED WITH 1976 WAS MUCH MORE THAN 7 PER CENT, THE GDP DEFLATOR MAY WELL BE A LITTLE LESS THAN THE BUDGET SPEECH FORECAST OF 7 PER CENT DUE TO THE STABILITY OF EXPORT PRICES SO FAR THIS YEAR.+

AS FOR THE OUTLOOK FOR TRADE THIS YEAR, HE SAID THAT, DESPITE THE SIGNS OF A REVERSAL SEEN IN THE JULY TRADE FIGURES, EXPORT PERFORMANCE FOR A YEAR AS A WHOLE, WOULD ONLY BE AROUND 4 PER CENT HIGHER THAN IN 1976.

+SO, WITH THE LABOUR FORCE STILL REMAINING VIRTUALLY FULLY EMPLOYED, THE ONLY CONSISTENT OUTCOME CAN BE A HIGH GROWTH RATE IN EXPENDITURE BY THE DOMESTIC SECTOR RELATIVE TO THE GROWTH RATE OF THE GDP, OR A LARGER DEFICIT IN THE CURRENT EXTERNAL ACCOUNT OR BOTH.

+THIS VIEW LENDS SUPPORT TO THE RATHER HIGH GROWTH RATES NOW FORECAST FOR CONSUMPTION AND INVESTMENT EXPENDITURE, AND TO THE LARGER VISIBLE TRADE DEFICIT IMPLIED IN MY REVISED FORECAST FOR IMPORTS AND EXPORTS,+ HE SAID.

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