Most independent forecasters agree that 1992 will see the resumption of economic growth. The recovery is expected to start slowly, but to gather pace. I expect growth in the year to the second half of 1992 to be almost 2 per cent. The level of GDP for this year as a whole should be about 1 per cent. higher than last.

As inflation in Britain has fallen, so too have interest rates; and that has put money in the pockets of mortgage payers. Indeed, a typical family with a £30,000 mortgage is now more than 15 per cent. better off in real terms than in October 1990—nearly £30 a week. That represents a considerable stock of pent-up spending power, which will in time feed through to stronger consumer spending.

Output will also be boosted by stronger export growth as the world economy recovers. Our share of world trade in manufactures rose in 1991 for the third successive year, despite the world slowdown, and I expect further gains in the future as lower inflation leads to improved competitiveness.

The current account deficit for last year was about £4½ billion, ¾per cent. of GDP. As domestic demand recovers, the deficit is likely to widen a little this year. At 1 per cent. of GDP for the year as a whole, it will be easily financeable.

Even with a resumption of growth, unemployment is likely to go on rising for some time. But while the increase will moderate over the months ahead, a sustained reduction in unemployment over the longer term will depend crucially on our success in keeping inflation down, and the prospects for that are better than at any time in recent economic history.

I expect retail price inflation to fall decisively below 4 per cent. by the end of the year and to be close to 3 per cent. by the middle of 1993. Producer price inflation will be even lower, down to 2 per cent. by the end of this year and to 1½ per cent. by the middle of 1993.