ECONOMIC INTELLIGENCE WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79B00457A000300050001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 49
• Document Creation Date: December 12, 2016
• Document Release Date: January 9, 2002
• Sequence Number: 1
• Publication Date: November 25, 1977
• Content Type: REPORT

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Assessment ORCON
('enter
Economic Intelligence
Weekly Review
25 November 1977
Secret
ER EIW 77-047
COPY N!
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Warning Notice
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NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
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of E.O. 11652, exemption category:
?5B(1), (2), and (3)
Automatically declassified on:
date impossible to determine
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SECRET
NOFORN-NOCONTRACT-OR CON
25X6
France: Outlook for the Economy Under Leftist Management . . . . . . . 1
When measured against rose-colored expectations, the economic results of
a Socialist/Communist coalition government would disappoint leftist
voters.
OPEC Oil Earnings: Impact of Exchange Rate Fluctuations . . . . . . . . .
Because pricing oil in dollars generally works to the advantage of OPEC
members, we anticipate no change in this policy at next month's Caracas
meeting.
Major Foreign Industrial Countries: Recovery Weakens . . . . . . . . . .
Economic forecasters will probably have to lower their sights for 1978.
The Soviet Economy in 1977: Few Bright Spots . . . . . . . . . . . . . 23
The economy remains bedeviled by low productivity, declining resource
growth, and fickle harvests.
USSR: Reducing Hard Currency Outlays . . . . . . . . . . . . . . . . 25
Moscow has stretched out the financing of purchases from hard currency
countries, trimmed orders for Western machinery, and taken advantage of
higher prices for raw material exports.
Common Fund Negotiations Bogged Down . . . . . . . . . . . . .
South Korea: Foreign Exchange Inflows Curbed . . . . . . . . . . .
East Germany Inks Big Deals with Japan . . . . . . . . . . . . . .
USSR Tries To Control Japanese Trans-Siberian Landbridge Cargoes
Statistics
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NOFORN-NOCONTRACT-OR CON
FRANCE: OUTLOOK FOR THE ECONOMY UNDER LEFTIST MANAGEMENT*
The economic policies of a leftist coalition government in France would almost certainly
fall far short of the expectations expressed in the Common Program of Government (CPG)
embraced since 1972 by the Socialists and Communists. In any case, recent dissension between
the two parties has materially reduced both their chances of winning the election next March
and the likelihood that they could cooperate in a durable government. A reconciliation
doubtless would give the upper hand to the more moderate Socialist Party, which has a
substantial edge over the Communists in electoral strength.
On balance, the policies of the left would be likely to worsen France's economic problems
over the next few years compared with what a Barre government might achieve. When
measured against overoptimistic expectations, the results surely would be a major disappoint-
ment to leftist voters, intensifying discord between the Communists and Socialists. Even under
the most favorable conditions, the two parties could hardly continue sharing the reins of power
for more than two or three years.
Latest polls still give the left a 49- to 47-percent edge in the popular vote, with 4 percent
going to the ecologists-most of whom will vote for the left in the second round. If the
Socialists and Communists can reach a pragmatic electoral agreement the election will be close,
otherwise the left is certain to lose. The Socialists are pressing for such an agreement, but the
Communists have refused to commit themselves.
The Common Program and Beyond
If the left comes to power in France, it would be able to implement only those policies
agreed to by both Socialists and Communists. This probably would mean staying within the
bounds of the original Common Program hammered out in the 1972 negotiations between the
two parties. Recent efforts to update the program ended in resounding failure, primarily
because the Communists demanded far more extensive nationalization than the Socialists
would accept.
Note: Comments and queries regarding the Ec
M
kly Review are
f
ff
25X6
welcome. For the text, they may be directed t
Economic Indicators, to
Economic Research, For the
ice o
of the O
of OER,
25X6
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While the CPG is an invaluable guide to likely leftist policies, it fails to address some
major problems, such as unemployment. More important are the many ambiguities which
leave the CPG open to widely varying interpretations. For example, the CPG is vague on a
number of crucial points regarding nationalization. It also is ambivalent and sometimes
contradictory on the subject of inflation. The CPG seems to provide a good guide to the
directions that leftist policies would take in various areas while telling little about the timing
and scope of these policies.
In all likelihood, basic economic policy would be set by the more moderate elements
within the left-personified by Socialist leader Francois Mitterrand and his two key economic
advisers, Jacques Attali and Michel Rocard. They would have the backing of the junior
member of the left alliance, the Left Radicals, who, despite their name, are the mostmoderate
of the three leftist parties. While Mitterrand may have difficulty with the more extreme
elements within his own party, he appears strong enough to keep them in check.
Mitterrand, who has fought long and hard to bring socialism to power in France, is
determined not to bungle the job. He is well aware of the economic blunders committed by
impetuous leftist governments in Chile and Portugal; thus, he and his advisers are committed
to mapping out a realistic strategy that would start France moving toward socialism without
disrupting the economy.
A leftist government would be compelled by the expectations of its supporters to follow
up promptly on its numerous campaign promises. Because of its obvious popular appeal, one of
the first issues addressed would be wages, in particular the minimum wage. Mindful of the
Chilean and Portuguese examples, the Socialists would have to reject demands already voiced
by the Communists for an immediate 40-percent hike in the minimum wage. A reasonable
compromise might be an immediate increase of about 15 percent, coupled with a pledge that
future gains would at least keep pace with inflation. This increase at the bottom of the wage
scale presumably would be accompanied by smaller percentage raises for other workers. Such a
compromise might raise average wages by nearly 10 percent in one quarter, compared with
the 2- to 3-percent gain to be anticipated under a Barre government.
Also up for early action would be some degree of nationalization. A plausible first
objective might be complete nationalization of banking by yearend 1978, coupled with
agreement on a schedule for takeovers of industrial firms. Socialist moderates are quite aware
that the left lacks trained administrators; they would probably seek to spread the nationaliza-
tions out over the five-year life of the new legislature to minimize disruptions. The
Communists and the labor unions, on the other hand, would press for faster and more extensive
action.
A critical problem for any French government over the next few years will be
unemployment. Joblessness has almost tripled over the past three and one-half years to a
current level of 1.2 million, or slightly more than 5 percent of the labor force. The Socialists
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would attack unemployment by creating about 200,000 public service jobs during the first year
of the leftist government. They expect that their economic policies would soon boost real GNP
growth to 5 percent or more and that after 1978 most job creation would occur in the private
sector. The Socialists hope to cut unemployment by 100,000 annually during the five-year life
of the next legislature. The Communists want a much more ambitious program of job creation
and economic stimulation and have even voiced the hope of reducing unemployment to
200,000 within five years.
Finally, a leftist government can be expected to alter taxes and expenditures along the
general lines indicated in the CPG. It would amend the 1978 budget to increase expenditures
for public projects and especially for transfer payments. The Socialists would want to do
something sufficiently dramatic to distinguish themselves from the present government,
although they have avoided publishing specific figures. A leftist government would thus be
compelled to announce expenditure increases of at least 10 percent beyond those called for in
the Barre budget, for whatever remains of the 1978 fiscal year. On the tax side, the
government presumably would move to lighten the burden on the poor by reducing income
tax rates for the lower brackets and the value-added tax on necessities. The budget deficit
would balloon because increased taxes on business and the wealthy would not cover the gap
created by the tax cuts and expenditure increases.
Problems of the French Economy Under Leftist Management
A leftist government would face irreconcilable differences between the ultimate
objectives of the two main coalition partners. The Communists want to build a Marxist state
complete with a centrally planned economy and nearly universal government ownership of the
means of production. The Socialists, in sharp contrast, would leave most of the economy in
private hands, although they would substantially increase the role of government. To
oversimplify, the one party sees the Soviet Union as its economic model, while the other looks
toward the Swedish example.
The division between Socialists and Communists almost certainly would grow over time
if they were in power. Agreement on the first steps of a leftist government would be relatively
easy, as is illustrated by the Common Program. For the Communists the CPG represents only a
first step, whereas for the Socialists it embodies most of what needs to be done. Once the
nationalizations and other measures outlined in the CPG are implemented, the interests of
Socialists and Communists would inexorably diverge.
A leftist government would encounter serious difficulties resulting from contradictions
within its policy package:
? The plan to boost the minimum wage would collide head on with the target of
slashing unemployment.
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? The rise in the general level of wages and the likely changes in taxes and
expenditures would conflict with the goal of slowing inflation.
? The new leftist policies toward business would run counter to the objective of
boosting investment and employment. Business earnings, which customarily fi-
nance more than half of French investment, would be severely squeezed by both
higher wages and higher taxes. Moreover, perceiving the leftist government as
antibusiness, businessmen would be reluctant to invest and hire new workers.
? Problems with investment, unemployment, and inflation would conflict with the
goal of allowing autonomy for nationalized firms on operational decisions. Pressure
would soon mount for the government to order these firms to hold down prices,
raise investment, and step up hiring.
The Probable Results: More Failures than Successes
Supporters of a leftist government almost certainly would be disappointed by its
economic performance. This would not be a major factor during the first year, both because
voters initially would be tolerant and because the problems themselves would develop
gradually. The disillusionment would grow in 1979-80, as inflation and unemployment
continue to worsen.
Under leftist management, we believe that the French economy would experience the
following:
Inflation would worsen. Instead of continuing its slow decline, the inflation rate
likely would move back into the double-digit range by the end of 1978. It would
continue to drift upward under the impact of increased budget deficits, larger
wage settlements, and rapid monetary growth.
Production would increase moderately. Under either leftist or rightist control
real GNP growth is most likely to be in the 4- to 5-percent range next year.
Consumption would play a larger role and private investment a smaller role under
leftist management.
The trade deficit would increase. Increased consumer spending seems certain to
spill over into imported goods, although depreciation of the franc-which probably
would precede the trade developments-could mitigate the adverseimpact on the
trade balance,
Unemployment would rise. Being unexpected, this development would be the
most devastating to the leftist government. Increased government hiring would be
more than offset by (a) increased private employer reluctance to add workers, (b)
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the elimination of jobs by a hike in the minimum wage, and (c) a likely increase in
labor force participation rates, induced by leftist promises of more jobs and higher
wages.
In an effort to quantify the economic implications of a leftist government, we simulated
three policy scenarios using our econometric model of the French economy. Our base-line
projection corresponds essentially to a continuation of current government policy. Our second
projection features a moderate leftist program along the lines discussed above. Our third
projection is built around a radical leftist scenario, a highly unlikely prospect.
Under all three scenarios, real economic growth proceeds at a rate below the long-term
French average-leading in each case to further substantial increases in unemployment over
the next three years. All three projections indicate that inflation also will continue to be a
problem through 1980, as will the current account deficit.
Performance under the radical leftist policy seems clearly inferior to performance under
the moderate leftist approach. Over the 1978-80 period, the radical policies produce slightly
France: Simulation Results for Three Policy Scenarios
Barre
Policy
Scenario
Moderate
Leftist
Scenario
Radical
Leftist
Scenario
Percent
Real GNP growth
1978 ................................................
4.1
5.0
4.7
1979 ................................................
3.6
5.0
5.4
1980 ................................................
5.6
4.8
4.3
Consumer price inflation
1978 ................................................
8.7
11.0
14.0
1979 ................................................
8.2
10.7
13.7
1980 ................................................
8.6
10.3
13.8
Increase in unemployment
1978
................................................
95
76
102
1979
................................................
111
109
123
1980
................................................
44
127
192
Curren
t account balance
1978 ................................................ 1.04
-0.84
-0.78
1979 ................................................ -0.69
-3.66
-4.68
1980 ................................................ -3.97
-5.91
-7.17
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slower real growth coupled with substantially greater unemployment, more rapid inflation,
and a larger current account deficit. Moreover, the differences in favor of the moderate policy
appear to grow over the three-year period.
The difference in results between the moderate leftist and the base-line scenarios is less
striking, although on balance the latter appears superior. The base-line projection suffers only
in the real growth comparison, where its average annual rate of 4.4 percent is one-half
percentage point below that yielded by moderate leftist policies. Even so, real growth
accelerates in 1980 in the base-line projection while tapering off in the moderate leftist
scenario. After 1979, unemployment is lower under the base-line scenario. Less surprisingly,
inflation-at about 8.5 percent annually-is two percentage points belowthe rate obtained
under moderate leftist policies, and the cumulative current account deficit for the three-year
period is less than one-third as large. (Confidential)
At this time, we do not think OPEC will switch from US dollar-denominated oil prices.
The decline in the value of the dollar since the last OPEC meeting in December 1976 has again
raised concern among OPEC countries over the declining real value of their oil earnings, which
are denominated in dollars. Deliberations at the upcoming December meeting in Caracas will
be influenced by this issue, but most OPEC members realize that pricing oil in dollars
continues to work to their advantage. The OPEC Economic Commission Board has calculated
that losses due to the declining value of the dollar in the last year have been minimal; the oil
ministers are unlikely to move to a new unit of oil pricing in the near future.
From time to time various OPEC members have questioned pricing oil in dollars,
sometimes advocating pricing in IMF Special Drawing Rights (SDRs) or some other basket of
currencies. We used three methods to measure whether OPEC members have gained or lost
from the dollar pricing of oil: by comparing the dollar's value relative to (a) the SDR, (b) a
group of major currencies weighted by the value of OPEC imports from each country, and (c)
the same group of major currencies weighted by the value of OPEC imports and foreign
investments in each currency.
SDR Pricing
According to press reports, OPEC concern over erosion of real export earnings has
rekindled interest in alternative oil pricing schemes. For example, Shaykh Ali Khalifa, Under
Secretary to the Kuwaiti Acting Oil Minister, recently discussed preserving the real value of oil
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earnings by setting oil prices in SDRs. OPEC members have not discussed any specific
alternative basket of currencies besides the SDR group. Since members have different trading
patterns with the major developed countries, they would have difficulty agreeing on another
currency mix.
The dollar has declined 1.4 percent against the SDR since the end of 1976, when most
OPEC members last raised oil prices. Despite this decline, the value of the US dollar relative to
the SDR is still nearly 3 percent above its 1973 level. Based on the dollar-SDR parity of 1973,
the dollar fell below its base period level only between December 1974 and July 1975.
OPEC: Net Revenue Accrued from Dollar Prices Relative to SDR Denominated Prices'
0.240
L23
I II III IV I II III IV I II III IV I II III IV
1974 1975 1976 1977
1. Net revenues are obtained by multiplying gross revenues by the changes in the SDR per US$ index based on 1973 parity. 574577
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Over the last four years, OPEC revenues from dollar oil prices have far exceeded the
potential revenues that would have been generated through an SDR pricing system. Since mid-
1974, when the dollar began to float against the SDR, cumulative dollar revenues have been
more than $10 billion above the amount that would have been received under an SDR pricing
scheme.
Exchange Rate Movements
Following the abandonment of the fixed exchange rate system in March 1973, the value
of major currencies has been determined largely by market forces. In terms of dollars, OPEC
countries pay higher real prices for goods imported from countries whose currencies appreciate
against the dollar and pay lower real prices for imports from countries with depreciating
currencies. Exchange rate movements have no effect on OPEC imports from the United States,
which are also in dollars. Since December 1976, appreciation of the yen, pound, and mark has
increased the real price of imports from Japan, the United Kingdom, and West Germany to
OPEC members in terms of their dollar-denominated exports. On the other hand, the real
prices of imports from Australia, Canada, Denmark, Norway, Spain, and Sweden have fallen
because their currencies have lost value relative to the US dollar.
The Purchasing Power of OPEC Oil Earnings
In 1977 the rapid appreciation of the yen and the continuing strength of the West
German mark lowered the purchasing power index for the dollar, as weighted by OPEC
imports, by about 3.5 percent. Nonetheless, at the end of October, the index stood at 3 percent
above the March 1973 level. * By the end of 1976 the dollar purchasing power index had risen
110
March 1973=100
108
*The purchasing power index of dollar revenues received by OPEC countries is a geometric average of the indexes for
the currencies of 17 major industrial nations relative to the US dollar, weighted by 1976 OPEC imports from the
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by nearly 7 percent over its March 1973 level. Since oil prices quadrupled in 1973/1974,
dollar-denominated oil prices have generated a purchasing power gain for OPEC countries,ex-
cept for the first six months of 1975.
The purchasing power index of dollar revenues weighted by OPEC trade and foreign
investment flows for 1976 shows less variation resulting from exchange rate movements; this
is attributable to the predominance of dollar-denominated financial assets in the OPEC
investment portfolio: From total export earnings of $123 billion in 1976, OPEC spent 77
percent on imports of goods and services and the remainder on foreign-currency-denominated
assets. This year, the trade and asset weighted index has fallen 3 percent, slightly less than the
index weighted by trade alone. At the end of October, the trade and asset weighted index stood
2 percent above its March 1973 level.
Prospects
The OPEC oil ministers meeting scheduled for 20 December will focus on the issue of
changing the price of oil. There is little indication that the ministers will seriously consider
switching from dollar-denominated oil prices. Even though reports indicate that Kuwait has
informed Saudi Arabia of a growing concern over the erosion of real income from currency
movements, the impact of world inflation on OPEC earnings still appears to be the primary
monetary issue.
The practice of basing oil prices in dollars will probably continue to prove superior to
SDR pricing, from the OPEC point of view. Whenever the dollar weakens against other major
currencies, however, the issue will reappear. (Confidential)
The economic recovery in the Big Six foreign inCtustrial economies-Japan, West
Germany, France, the United Kingdom, Italy, and Canada-has lost steam in recent months.
Nearly all indicators show practically no real growth in the Six since the first quarter of this
year, with unemployment up by more than 10 percent. The only favorable trend has been a
substantial slowdown in inflation.
As a result of these lackluster production trends, expectations for Big Six real growth in
1977-78 have been revised downward in recent months; most of the resulting cuts in growth
forecasts have been made for 1977, rather than for 1978. For example, Chase Econometric last
group. The nations are Australia, Austria, Belgium, Canada, Denmark, France, Italy, Japan, Netherlands, Norway,
South Africa, Spain, Sweden, Switzerland, United Kingdom, United States, and West Germany. These countries supply
more than 80 percent of OPEC imports.
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Big Six: Comparisons of Mid-1977 Forecasts for 1977-78 Real GNP Growth With
Recent Forecasts
Forecasts for 1978
Chase Econometric Associates, Inc.
May' October May October
Japan
West Germany
France
United Kingdom
Italy
Canada
Weighted average
6.2
4.6
3.5
1.4
3.6
3.7
4.3
5.8
3.0
2.0
0.5
2.9
1.9
3.2
5.5
3.6
3.4
0.6
2.4
3.6
3.6
4.8
3.5
3.3
3.4
2.5
3.4
3.7
Japan
June
5.5
November
5.9
June
NA (6.0)
5.2
(5.6) 4
West Germany
4.0
3.1
NA (3.7)
3.1
(3.2)
France
3.0
3.0
NA (3.0)
3.2
(2.9)
United Kingdom
1.0
0.2
NA (1.9)
2.7
(2.7)
Italy
2.2
1.8
NA (0.5)
1.1
(0.5)
Canada
3.0
2.2
NA (3.9)
3.3
(3.9)
Weighted average
3.6
3.3
3.5
(3.0)
Data Resources, Inc.
May
October
May
October
Japan
5.6
5.5
5.8
5.5
West Germany
5.0
3.4
4.9
4.9
France
3.7
3.1
5.4
4.6
United Kingdom
1.5
0.3
2.3
3.9
Italy
1.9
2.1
2.3
3.0
Canada
3.3
2.1
4.3
4.6
Weighted average
4.1
3.3
4.6
4.7
Japan
August
5.7
October
5.7
August
5.7
October
5.7
West Germany
4.0
3.0
4.4
4.0
France
3.7
3.3
3.9
4.5
United Kingdom
0.9
0.5
2.2
2.5
Italy
2.4
0.5
2.7
2.5
Canada
3.5
2.1
4.6
4.0
Weighted average
3.9
3.5
4.3
4.5
' Months indicate the date of the forecast.
Figures within parenthesis refer to growth in first half 1978 over first half 1977 at an annual
rate.
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month cut its forecast for Big Six real growth in 1977 to 3.2 percent, compared with its 4.3-
percent estimate last May. Forecasts by OECD, Data Resources, and CIA have been similarly
reduced.
Output and Unemployment
Seasonally adjusted industrial production in the Six as a group declined by more than 3
percent from last March through September, with variations among individual countries:
? Italian industrial production plummeted to 12 percent below its December 1976
peak, even with a 6-percent rebound in September.
? Production in West Germany, France, and the United Kingdom dropped to a
September output level 2 to 4 percent below that in March.
? Japan and Canada managed to hold their industrial production about even.
The slowdown in production has compounded the severe unemployment problems that
the Six faced last year. Even when production was growing in 1976, unemployment was only
holding steady. This year unemployment rates have skyrocketed. Within the Six (excluding
Italy, for which data are unavailable), 5.7 million persons were jobless in September, up from
5.1 million last January. Unemployment has worsened unevenly among the Six.
? France and Canada, the unluckiest of the group, have seen their unemployment
rates increase this year by 25 percent and 15 percent respectively.
? Joblessness in Japan and the United Kingdom has grown to about 10 percent
above January levels, despite a sharp improvement in Japan's unemployment in
August.
? Unemployment in West Germany has crept up steadily but very slowly, to a
level 2 percent higher than last January.
? In Italy, where a major revision in unemployment statistics is under way,
joblessness has increased substantially since the beginning of the year.
Real Import Trends
The real value of imports by the Six as a group fell about 4 percent from fourth quarter
1976 through third quarter 1977, even though the decline bottomed out in the third quarter. In
the real value of US imports increased by 8 percent from fourth quarter 1976 through
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Kingdom
INDUSTRIAL PRODUCTION
INDEX: JAN 1976=100
JAN APR JUL OCT JAN APR JUL
1976 1977
PERSONS UNEMPLOYED
INDEX: JAN 1976=100
JAN APR JUL OCT JAN APR JUL
1976 1977
llncludingdata for Japan, West Germany, France,
UK, Canada
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third quarter 1977. Among the Six,
Italy experienced the largest decline
in imports-a 16-percent drop from
fourth quarter 1976 through third
quarter 1977. Only West German
imports increased this year through
the third quarter.
Consumer Price Trends
The brightest economic trend in
the Six has been a substantial reduc-
tion in inflation. The Six as a group
saw their seasonally adjusted index of
consumer prices increase at an an-
nual rate of nearly 12 percent in
fourth quarter 1976. In contrast, in
third quarter 1977, inflation was less
than 9 percent.
Among the Six, Britain and Italy
recorded the largest drops in infla-
tion. British inflation, hitting at a 22-
percent rate late last year, declined
to 11 percent in the third quarter.
Italian inflation subsided to an Octo-
ber pace of about 12 percent, com-
pared with a 28-percent rate in
fourth quarter 1976.* In contrast,
inflation in France has gone back up
after a dip in early 1977, and infla-
tion in Canada is now more rapid
than in late 1976. Only Japan and
West Germany have brought their
inflation rates down to pre-1973
norms. (Official Use Only)
* * * * *
*To smooth out single-month fluctuations in
consumer price changes, we define the annual
rate of inflation as a moving quarter-to-quar-
ter change. For example, an October rate is
the percent change in the average seasonally
adjusted consumer price index for August-
October, relative to the same measure for
May-July, expressed as an annual rate.
CONSUMER PRICES: INFLATION1
PERCENT CHANGE
30
20-
\TJapan`
West Germany
-JAN APR JUL OCT JAN APR JUL
1976 1977
1Average for three months ending in month indicated
over that for three preceding months, seasonally
adjusted, at annual rate
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Next 8 Page(s) In Document Exempt
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THE SOVIET ECONOMY IN 1977: FEW BRIGHT SPOTS
The Soviet economy remains bedeviled in 1977 by low productivity, declining resource
growth, and fickle harvests. Unless the leadership can make progress in these areas next year,
the 4-percent average growth projected by OER for the balance of the 1970s will prove
difficult to achieve.
We estimate Soviet GNP will rise by 3 percent in 1977, down from the 4.2 percent
registered last year and far from the 5-percent average annual target for 1976-80. Agricultural
growth has been stunted by the disappointing grain harvest this year, which means continued
large outlays for foreign grain. Industrial growth, less than 5 percent for the second consecutive
year, is still hobbled by lagging output of industrial materials, notably steel and electric power.
Investment plans continue to be frustrated by slowed-down growth in machinery output and
lags in bringing new capacity on stream. Fuel shortages have multiplied and are hampering a
number of industrial and agricultural operations. The sole positive note is a $1.5 billion to $2
billion reduction in the hard currency trade deficit.
Agriculture Fails To Meet Needs
The Soviet farm sector remains at the mercy of the weather. The decline in projected
farm output stems from a 5-percent decline in crop production, which will more than offset a
3-percent increase expected in livestock products. The major element in the crop downturn is
the graih harvest announced by Brezhnev at 194 million tons-13 percent below last year's
record and 9 percent below plan. Production of major nongrain crops will remain close to last
year's levels.
Estimated grain purchases of 18 million to 20 million tons for delivery in the year
re ginning 1 July 1977 should fill the gap between grain output and the currently planned
quirements, including feeding of livestock. Last year meat output and consumption slumped
following the poor 1975 harvest, setting back per capita meat consumption almost to the 1970
level. If our estimate of a 7-percent rise in meat output stands up, per capita meat consumption
will merely regain the 1972 level. This slow recovery, coupled with an official policy of
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holding state retail prices at current levels, means a continuation of the chronic shortages of
meat and dairy products. Indeed, a lecturer in Leningrad recently conceded that meat
shortages will continue into the 1980s.
Industry Lacks Basic Inputs
Industrial output should grow by 4.5 percent in 1977, the second slowest growth rate in
the postwar era (1976 was the worst) and substantially below the average annual rate of 6
percent achieved in 1971-75. This uninspired performance, the second in a row, reflects
stagnation in the output of ferrous metals, which in turn stems from inadequate investment in
steelmaking facilities and insufficient supplies of high-quality raw materials. A steady decline
in the quality of Soviet iron ore has forced the diversion of investment funds from steelmaking
plants to ore mining and ore beneficiating projects. The high growth rates for producer and
consumer durables have been decliningsteadily since 1973 and may fall even further this year
given the problems in producing ferrous metals.
Energy-producing branches also have experienced declining rates of growth this year.
The increase in electric power has fallen to an unprecedented low of 3.6 percent. Growth rates
of petroleum products and natural gas, while reasonably close to the current plan, were
running behind last year's rates for the first three quarters. Fuel shortages this year have been
widespread, frequent, and severe. Several ministries have reported a general fuel shortage, and
some temporary bottlenecks have been reported. Recognizing that energy resources must be
conserved, Moscow has initiated a stringent fuel allocation program. Instead of setting annual
targets for energy use, the Council of Ministers has established norms by quarterly periods and
has tasked the People's Control Committee to conduct an energy use census this year, reporting
abuses and steps taken to correct them.
Capital Formation Still Behind Schedule
Problems in investment programs are a harbinger of a continued poor growth perfor-
mance. Despite efforts to concentrate investment on renovation of existing assets and
completion of projects already begun, the increase in gross additions of new plant and
equipment-a measure of the amount of new capacity brought on stream-fell to an alltime
low of 1.4 percent in 1976, with the backlog of unfinished construction increased by nearly 10
percent. No effective actions have been taken to step up the pace of capital formation. While
firm data for 1977 are lacking, the Soviet press indicates that unfinished projects have
continued to plague all sectors this year, mainly because of slow procurement and installation
of equipment. A continuation of the slide in machinery growth could dash the leadership's
Foreign Trade Deficit Brought Down
This year Moscow has been partially successful in implementing measures begun in 1976
to reduce the hard currency deficit. The improved position is being achieved by expanding
hard currency exports and by trimming imports-particularly grain.
24 SECRET
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Export earnings' in 1977 should rise from $10 billion to $11 billion-$11.5 billion. Most of
the boost will come from higher prices for raw materials, not from increased deliveries of oil as
in 1976. The Soviets also are cutting hard currency imports in 1977 by about $500 million, to
roughly $15 billion. Lower imports of grain this year-most of this year's purchases will be
delivered next year-will more than offset a rise in machinery and equipment imports. In an
effort to reduce future imports of Western machinery and equipment, Moscow has cut orders
inthe first eight months of 1977 to less than one-half the level of the comparable 1976 period.
Soviet imports of Western machinery thus should fall in 1978. (Secret)
USSR: REDUCING HARD CURRENCY OUTLAYS
The USSR is continuing belt-tightening measures adopted in 1976 to reduce its hard
currency trade deficit and minimize hard currency outlays. Moscow has sought to delay
payments on some purchases and has requested financing on deals normally handled on a cash
basis. The Soviet Union also has continued to rely on government-backed suppliers' credits and
direct government loans, which offer fixed and generally lower interest rates, and has cut back
on the more costly syndicated loans from Western banks. A harbinger for 1978 is the reduction
so far this year of Soviet orders for Western machinery and equipment-which, if continued,
will result in a decline in such imports.
The hard currency trade deficit this year should fall to between $3.5 billion and $4
billion, down from $5.5 billion in 1976 and the record $6.4 billion of 1975. Hard currency
exports are expected to rise 10 to 15 percent with imports falling slightly.
Soviet grain imports from the West will decline from $2.6 billion in 1976 to about $1.5
billion in 1977 unless Moscow moves some grain deliveries up from 1978. The drop in grain
imports should be partly offset by a substantial increase in machinery and equipment imports
over the $5.1 billion figure of last year.
Soviet oil deliveries to the West, which accounted for three-fourths of the increase in
hard currency exports in 1976, are not playing the same leading role in 1977. So far this year,
West Germany, France, Japan, and the UK are taking less oil than in 1976; Italy and some
smaller West European customers are taking more. Although no substantial change in volume
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is expected this year, Soviet earnings from oil in 1977 will benefit from higher prices. Prices are
also higher on other Soviet export commodities, such as timber and platinum group metals. In
addition, the volume of Soviet gas exports has been rising substantially this year.
Financing the Deficit
As in 1976, the Soviets again have sought to minimize cash outlays by delaying payments
to some Western suppliers while asking others for financing on sales that formerly were for
cash. Moscow reportedly asked Japanese steel companies earlier this year to change the
payment period for steel imports from the usual 30 days to 90 days after delivery without
interest charges. A Swedish firm reported being pressed by Moscow to grant supplier credits
for electrical equipment worth only a few hundred thousand dollars, whereas in the past it
received cash for similar equipment valued at several million dollars.
Moscow has continued to rely primarily on government-backed suppliers' credits and
direct government loans-noted for their fixed and often subsidized interest rates-for most of
the estimated $3.5 billion in new drawings needed to finance machinery, equipment, and pipe
imports from the West in 1977. The fluctuating interest rates on new syndicated credits from
Western banks apparently were higher than the Soviets were willing to pay, thereby reducing
Moscow's use of such facilities. Gold sales of $500 million through midyear have also helped
Moscow finance its deficit this year.
The Soviet hard currency trade deficit should be further reduced in 1978. Imports of
Western grain are likely to be about $2 billion. This figure could climb higher, however, if the
Soviet harvest fails to better this year's disappointing results.
The drop in orders placed in the West for machinery and equipment this year portends a
decline in machinery imports which should more than offset any conceivable rise in grain
imports. Orders in the first eight months of 1977 totaled roughly $2 billion-less than one-half
the level for the comparable period in 1976.
The sharp drop in orders largely stems from a $1 billion cut in Soviet contracts for oil and
gas equipment. Nearly $1 billion in orders for the Orenburg gas pipeline swelled the 1976
total; this year no comparable contracts have been signed. Large contracts for oil and gas
equipment could be concluded by yearend, however, if Moscow places orders for $1 billion
worth of gas lift equipment it is seeking from the West.
Hard currency exports in 1978 are expected to grow at least as much as this year,
particularly if economic growth in the West accelerates. Exports of natural gas and chemicals
under compensation agreements are also scheduled to increase.
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A major unknown is how much oil the Soviets will allocate for hard currency export. An
OPEC price increase of 5 to 10 percent would yield the USSR an additional $250 million to
$500 million in oil revenues at the 1976 export level of 1 million barrels per day. This would
boost oil earnings to more than $5 billion.
Financing should not be a major problem next year, especially if Moscow succeeds in
further reducing its trade deficit. The credits the Soviets have lined up in recent months will
allow Moscow to continue to draw on government-backed credits to finance equipment
imports.
Moscow's tough stand during credit negotiations, coupled with concern of Western
governments over the sharp drop in Soviet machinery and equipment orders, have been
effective in obtaining a continuation of liberal credit terms from several Western countries.
The terms in many cases have not been in line with those of the Gentlemen's Agreement, a
consensus that covers official export credits of major Western countries.
Barring a drastic drop in price, Soviet gold sales should fortify Moscow's ability to abstain
from private loan syndications. (Confidential)
Common Fund Negotiations Bogged Down
Little progress has been made in bridging the gap between developing and industrialized
countries' positions during the first half of the month-long common fund negotiations now
under way in Geneva,* We expect the LDC caucus (known as the Group of 77 or G-77) to
keep pushing for acceptance of its version of the common fund without offering compromises.
Indeed, the unwieldy nature of the LDC caucus and the premium placed on group unity
preclude significant shifts in position. If the talks follow the pattern of previous North-South
negotiations, they will extend beyond the scheduled 2 December closing. In any event, some
sort of concluding conference statement will probably be hammered out in the middle of the
night by exhausted negotiators; the statement would call for a new round of negotiations next
year.
*For a discussion of conference issues, see "Common Fund Negotiations Heat Up," Economic Intelligence Weekly Review,
3 November 1977.
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Thus far, the industrial countries have resisted G-77 pressure to abandon their joint
opening proposal, which (a) looked to common fund finance based on pooled resources from
individual commodity agreements and (b) sought to defer discussion of a "second window" for
various forms of development aid to the LDCs. Although the Netherlands and Denmark are
pushing within the EC for fundamental changes in the joint proposal, the EC as a group seems
only to have slightly softened its position, for example, by being willing to consider voluntary
contributions to a second window. Conscious of G-77 efforts to undermine the unity of the
industrialized countries, the EC decided not to formally schedule the common fund
negotiations on the agenda of its Foreign Ministers meeting this past Monday and Tuesday.
The LDCs, as expected, have been inflexible publicly. Their statements-particularly last
Friday's condemnation of the industrialized country position-have been aimed at convincing
the developed nations that they have no option but to begin bargaining on a version of the
common fund that includes prior, direct financing and a second window. LDC tactics have
focused on splitting the Dutch and the Nordics away from the opening industrialized country
position, rather than devising constructive counterproposals. At the same time, individual LDC
representatives have hinted to US delegates that the G-77 can be flexible. At this
point, we do not anticipate a s i t in the G-77 stance during the current negotiations, even if
the industrialized countries make major concessions. The most that can be expected are G-77
statements welcoming any industrialized country concessions but without offering compro-
mises in the LDC position. (Confidential Noforn)
25X6
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South Korea: Foreign Exchange Inflows Curbed
Reacting to the inflationary pressures from growing foreign exchange reserves, Seoul has
adopted stopgap measures to slow foreign exchange inflows. The government has:
? Banned until yearend the conversion into local currency of (a) foreign exchange
earnings from overseas construction work and other services and (b) advance export
proceeds.
? Cut preferential loans to exporters from 420 to 380 won per dollar of export.
? Abolished foreign currency loans for the import of certain essential raw materials.
South Korean foreign exchange reserves have risen from less than $3 billion at yearend
1976 to $4.3 billion at the end of October. The gains have resulted from rapid export growth
and increased earnings from Middle East construction work, Earnings from overseas construc-
tion activity totaled $560 million in first half 1977 compared with $63 million a year earlier.
The increase in foreign exchange reserves has been accompanied by a 32-percent
increase in the money supply since last December. Seoul has resorted to tight monetary and
fiscal policies, limits on domestic credit, and price controls on most manufactured goods to hold
inflation to about 10 percent. The most recent measures will temporarily moderate the inflow
of foreign exchange while slowing economic growth and exports. Nonetheless, Seoul should
approach its 10 percent real GNP growth target and reach $10 billion in exports this year.
(Confidential)
East Germany Inks Big Deals with Japan
The East German campaign to increase hard currency receipts reached its highest point
last week with the signing of two agreements with Japan. The Japanese will build and finance a
petrochemical complex and a tourist hotel in East Germany. The factory complex agreement,
reportedly valued at $350 million to $500 million, includes a high proportion of compensation/
buyback, while the hotel contract, the value of which has not been announced, involves
guaranteed occupancy by Japanese tourists. Party Chairman Honecker supports these kinds of
projects as an alternative to cutting back on imports of Western consumer goods. (Confidential)
USSR Tries To Control Japanese Trans-Siberian Landbridge Cargoes
The USSR's freight forwarding monopoly, Soyuzvneshtrans, and three Japanese freight
forwarding firms have asked for permission to establish a corporation to be known as the
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Nippon-Soviet International Transport Company (NISOTRA). This firm would give the USSR
closer control over containerized cargoes moving over the Trans-Siberian Landbridge (TSLB)
between Japan, Iran, and Europe. The merger is opposed by the Japanese Shipowners
Association (JSA) as injurious to shipping and by the Foreign Ministry as damaging to national
security. The Japanese backers of NISOTRA say that it would (a) help restore some of the
competitiveness lost from the rise in Japanese costs and the appreciation of the yen and (b)
open new markets for Japanese goods. The Ministry of Transport, which must approve the
merger, will act cautiously, aware that Soviet joint venture firms in Europe have moved into
shipping agencies, cargo forwarding, container leasing, trucking, port cargo handling, and
warehousing. (Unclassified)
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 Secret
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Assessment
Center
Economic Indicators
Weekly Review
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
This publication is prepared for the use of U.S. Government
officials. The format, coverage and contents of the publication are
designed to meet the specific requirements of those users. U.S.
Government officials may obtain additional copies of this document
directly or through liaison channels from the Central Intelligence
Agency.
Non-U.S. Government users may obtain this along with similar
CIA publications on a subscription basis by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gifts Division
Library of Congress
Washington, D.C. 20540
Non-U.S. Government users not interested in the DOCEX
Project subscription service may purchase reproductions of specific
publications on an individual basis from:
Photoduplication Service
Library of Congress
Washington, D.C. 20540
11 Approved For Release-2002/02/01 CIA-RDP79B00457AU dM
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1. The Economic Indicators Weekly Review provides up-to-date information
on changes in the domestic and external economic activities of the major non-
Communist developed countries. To the extent possible, the Economic Indicators
Weekly Review is updated from press ticker and Embassy reporting, so that the
results are made available to the reader weeks-or sometimes months-before receipt
of official statistical publications. US data are provided by US government agencies.
2. Source notes for the Economic Indicators Weekly Review are revised every
few months. The most recent date of publication of source notes is 20 October 1977.
Comments and queries regarding the Economic Indicators Weekly Review are
welcomed.
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 NDUSTRIAIe P " ON021A~E~c~~- RP?~~9~ ~ It g4r ~~41a5
United States
Japan
'"~1 3 AVERAGE 120
West Germany
130
120
110 113
~j~ll`~I V Y ~ 126
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United Kingdom
130
LATEST
MONTH
United States OCT 77
Japan SEP 77
West Germany SEP 77
France SEP 77
131
Percent
. AVERAGE ANNUAL
Percent
AVERAGE ANNUAL
Change
GROWTH RATE SINCE
Change
from
GROWTH RATE SINCE
from
Previous
1 Year 3 Months
LATEST
Previous
1 Year 3 Months
Month
1970 Earlier Earlierl
MONTH
Month
1970 Earlier Earlierl
0.3
3.6 6.7 2.4
United Kingdom
SEP 77
-0.6
0.4 -1.7 0.6
-0.1
3.7 3.3 -4.0
Italy
SEP 77
6.5
2.4 -2.2 -29.1
0.9
1.8 0.9 -3.4
Canada
AUG 77
0
3.9 2.7 0.3
1.6
3.3 1.6 -4.2
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UNEMPLVYM N PERCENT OF LABOR FORCE
United States
Japan
West Germany
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1972 1973 1974 1975 1976 1977
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United Kingdom
Italy (quarterly)
=A labor force survey based on new definitions of economic activity sharply raised the official estimate of Italian unemployment in first quarter 1977. Data for earlier periods thus are not comparable.
Italian data are not seasonally adjusted.
Canada
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1972 1973 1974 1975
THOUSANDS OF PERSONS UNEMPLOYED
1 Year 3 Months
Earlier Earlier
1 Year
Earlier
3 Months
Earlier
United States
OCT 77 6,872 7,564 6,744 ?
United Kingdom
OCT 77
1,433
1,308
1,394
Japan
AUG 77 1,130 1,100 1,140
Italy
77 IIL
1,692
776
1,432
West Germany
OCT 77 1,041 1,026 1,051
Canada
SEP 77
798
753
847
France
SEP 77 1,159 941 1,150
NOTE: Data are seasonally adjusted. Unemployment rates for France are estimated. The rates shown. for Japan, Italy and Canada are
roughly comparable to US rates. For 1975-77, the rates for France and the United Kingdom should be increased by 5 percent and
15 percent respectively, and those for West Germany decreased by 20 percent to be roughly comparable with US rates.
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DOMESTIC PRICES' INDEX: 1970=100
Semilogarithmic Scale
Japan
West Germany
150
125
France
225
200
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
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United Kingdom
Percent
AVERAGE ANNUAL
Percent
AVERAGE ANNUAL
Change
from
GROWTH RATE SINCE
Change
f
GROWTH RATE SINCE
LATEST
Previous
1970
1 Year
3 Months
LATEST
rom
Previous
1970
1 Year
3 Months
MONTH
Month
Earlier
Earlier
MONTH
Month
Earlier
Earlier
United States
OCT 77
0.7
8.5
6.9
6.9
.'- United Kingdom
OCT 77
0.6
14.6
17.8
7.9
SEP 77
0.4
6.6
6.6
4.9
SEP 77
0.5
13.8
15.6
4.4
Japan
OCT 77
-0.3
7.4
0.1
0
Italy
AUG 77
0.5
15.6
14.3
4.6
SEP 77
1.8
10.5
7.6
6.2
OCT 77
1.1
13.2
16.6
11.9
West Germany
-SEP 77
-0.1
5.1
1.6
-0.6
Canada
AUG 77
0.4
10.1
9.8
7.9
OCT 77
0.1
5.4
3.8
-0.3
t?
OCT 77
1.0
7.5
8.8
8.1
France
SEP 77
0.6
8.2
6.1
5.4
SEP 77
0.9
9.0
9.6
9.5
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GNP'
RETAIL SALES '
Constant Market Prices
Constant Prices
Average
Average
Annual Growth Rate Si
nce
Annual Growth Rate Since
Percent Change
Percent Change
Latest
from Previous 1 Year
Previous
Latest
from Previous
1 Year
3 Months
Quarter
Quarter 1970 Earlier
Quarter
Month
Month
1970
Earlier
Earlier'
United States 77 III
0.9 3.2 4.6
3.8
United States
Sep 77
-1.4
2.9
4.2
-0.6
Japan 77 II
1.9 5.6 5.6
7.6
Japan
Jun 77
-0.1
9.8
2.6
1.4
West Germany 77 II
-0.2 6.3 2.4
-1.0
West Germany
Sep 77
-0.8
2.4
2.6
10.8
France 76 IV
0 3.9 4.9
0
France
Jun 77
7.7
-0.3
1.0
-8.1
United Kingdom 77 I
-1.9 1.6 -1.3
-7.5
United Kingdom
Oct 77
-0.2
0.9
-1.9
5.4
Italy 77 I
2.3 3.2 4.9
9.4
Italy
Apr 77
-0.4
2.8
1.0
-3.1
Canada 77 II
-0.6 4.9 0.5
-2.4
Canada
Aug 77
4.7
4.5
1.3
-0.5
' Seasonally adjusted.
Seasonally adjusted.
2 Average for latest 3
months compared with avera
ge for previous 3 months.
FIXED INVESTMENT'
WAGES IN MANUFACTURING'
Non-residential; constan
t prices
Average
Annual G
rowth Rat
e Since
Average
Percent Change
Annual Growth Rate
Since
latest
from Previous
1 Year
3 Months
Percent Change
Period
Period
1970
Earlier
Earlier
Latest
from Previous 1 Year
Previous
Quarter
Quarter 1970 Earlier
Quarter
United States
Sep 77
0.4
7.5
6.6
6.5
United States 77 III
1.0 2.1 7.8
4.2
Japan
Aug 77
2.2
17.0
9.8
8.7
Japan 77 11
0.5 1.1 4.5
2.0
West Germany
77 II
1.7
9.5
7.5
7.2
West Germany 77 11
-1.6 0.4 3.4
-6.4
France
77 I
2.3
14.1
13.9
9.5
France 75 IV
8.8 4.2 2.9
40.1
United Kingdom
Aug 77
0
15.3
3.0
3.5
United Kingdom 77 1
-0.6 0 3.4
-2.5
Italy
Aug 77
3.7
21.0
23.8
23.7
Italy 77 I
6.6 3.9 17.6
29.0
Canada
Aug 77
0.2
11.2
9.9
9.0
Canada 77 11
6.1 3.2 - 1.1
26.7
' Hourly earnings (seasonally adjusted) for the United States, Japan, and Canada; hourly wage
Seasonally adjusted.
rates for others. West German and
French data refer to the beg
inning of
the quarter.
Average for latest 3 months co
mpared with that
for previous
3 months.
MONEY MARKET RATES
Percent Rate of Interest
1 Year
3 Months
1 Month
Representative rates
Latest Date
Earlier
Earlier
Earlier
United States
Commerical paper
Nov 16 6.56
5.13
5.89
6.59
Japan
Call money
Nov 18 4.50
6.75
5.75
4.88
West Germany
Interbank loans (3 months)
Nov 16 4.06
4.60
4.06
4.10
France
Call money
Nov 18 9.13
10.31
8.25
8.38
United Kingdom
Sterling interbank loans (3
months)
Nov 16 4.76
14.59
6.60
4.85
Canada
Finance paper
Nov 16 7.39
9.38
7.47
7.24
Eurodollars
Three-month deposits
Nov 16 7.09
5.41
6.36
7.30
Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
 EXPORT PRICE,Qpproved For Release 2002/02/01
US $
CIRKl79?09*57A000300050001-5
National Currency
United States
Sep
77
0.6
9.4
3.0
-0.8
United States
Sep 77
0.6
9.4
3
.0
-0.8
3
-
Japan
Jul 77
-
1.8
10.4
10.4
-4.4
Japan
Jul 77
-
1.0
6.3
3
.1
5.
3
-
West Germany
Sep
77
-
1.5
11.0
6.2
3.6
West Germany
Sep
77
-
1.2
4.2
-1
.2
2.
France
Sep
77
-
1.4
11.2
8.3
12.1
France
Sep
77
-
0.9
9.4
8
.5
10.1
United Kingdom
Oct
77
1.9
11.1
23.2
26.1
United Kingdom
Oct
77
0.4
15.9
14
.3
13.6
Italy
Jul
77
1.7
11.3
13.3
18.9
Italy
Jul
77
1.4
16.9
19
.4
16.4
Canada
Aug
77
3.5
9.9
1.5
17.4
Canada
Aug
77
4.4
10.2
1
0.2
27.3
IMPORT PRICES
National Currency
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year 3 Months
Month month 1970 Earlier Earlier
United States Sep 77 0 13.2 8.1 7.2
Japan Jul 77 -1.5 10.5 -2.3 7.0
West Germany Sep 77 -2.3 4.0 -1.3 -5.5
France Sep 77 -1.0 10.1 7.4 0.6
United Kingdom Oct 77 -0.4 18.7 8.3 -6.3
Italy Jul 77 - 1.6 20.7 15.3 10.4
Canada Aug 77 3.2 9.3 15.5 31.3
CURRENT ACCOUNT BALANCE'
Latest
Period Million US $ 1977 1976 Change
United States' 77 II -4,605 -8,763 1,070 -9,833
Japan Sep 77 1,142 6,473 1,815 4,658
West Germany Sep 77 -673 119 956 -837
France 77 II -438 -2,101 -2,052 - 50
United Kingdom 77 II -474 - 1,490 - 1,277 -213
Italy 77 I -929 -929 - 1,468 539
Canada 77 II -1,412 -2,229 -3,088 859
1 Converted to US dollars at the current market rates of exchange.
r Seasonally adjusted.
EXCHANGE RATES
Spot Rate
As of 4 Nov 77
US $ 1 Year 3 Months
Per Unit 19 Mar 73 Earlier Earlier 11 Nov 77
Japan (yen) 0.0041 8.05 21.03 9.75 1.26
West Germany 0.4461 25.99 7.73 3.84 0.35
(Deutsche mark)
France (franc) 0.2061 -6.48 2.65 1.31 0.55
United Kingdom 1.8240 -25.88 11.73 4.81 0.50
(pound sterling)
Italy (lira) 0.0011 -35.65 - 1.47 0.62 0.09
Canada (dollar) 0.9016 : - 9.63 - 11.88 -3.03 0.04
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier
1 Year 3 Months
End of Billion US $ Jun 1970 Earlier Earlier
United States Aug 77 19.1 14.5 18.6 19.2
Japan Oct 77 19.6 4.1 16.6 17.6
West Germany Sep 77 34.5 8.8 35.0 34.3
France Sep 77 10.0 4.4 9.4 10.2
United Kingdom Oct 77 20.2 2.8 4.8 13.4
Italy Sep 77 10.5 4.7 5.1 9.7
Canada Aug 77 4.8 4.3 5.6 5.2
BASIC BALANCE'
Current and Long-Term-Capital Transactions
Cumulative (Million US $)
Latest
Period Million US $ 1977 1976 Change
United States No longer published'
Japan Sep 77 611 4,398 1,732 2,666
West Germany Sep 77 -1,341 -4,642 1,655 -6,297
France 77 I - 1,354 - 1,354 -2,015 660
United Kingdom 77 II 1,409 2,075 -1,119 3,195
Italy 76 III 878 N.A. 1,096 N.A.
Canada 77 I 164 164 882 -718
Converted to US dollars at the current market rates of exchange.
r As recommended by the Advisory Committee on the Presentation of Balance of Payments
,Statistics, the Deportment of Commerce no longer publishes a basic balance.
TRADE-WEIGHTED EXCHANGE RATES'
1 Year 3 Months
19 Mar 73 Earlier Earlier 11 Nov 77
United States 4.44 - 0.40 -1.71 -0.39
Japan 13.92 22.93 9.12 1.18
West Germany 28.38 5.16 2.34 0.07
France -8.67 - 1.16 -1-01 0.31
United Kingdom -26.94 10.99 3.95 0.28
Italy -39.57 -5.20 - 1.63 -0.23
Canada -8.46 -13.34 -3.91 -0.07
' Weighting is based on each listed country's trade with 16 other industrialized countries to
reflect the competitive impact of exchange rate variations among the major currencies.
Average
Annual Growth Rote Since
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
FOREIGN TRADE BILLION US $, f.o.b., seasonally adjusted
United States
14.0
12.0
10.0
Japan
7.0
West Germany
10.0
8.0
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
United Kingdom
LATEST
MONTH
MILLION
US $ 1977
1976
CHANGE
LATEST
MONTH
MILLION
US $ 1977
1976
CHANGE
10
916
584
90
85
171
6.4??0
4,894
46,020
36,432
26.3?o
United States
SEP 77
,
12,631
,
109,882
,
88,297
24.4%
United Kingdom
OCT 77
4,839
48,927
41,814
17.0%
Balance
-1,715
-19,298
-3,126
-16.172
Balance
55
-2,907
-5,383
2,475
439
6
58
430
48
305
21.0?0
3,608
32,833
26,553
23.7% i`"..
Japan
SEP 77
,
5,183
,
45,838
,
40,860
12.2%
Italy
SEP 77
3,357
32,430
29,079
11.5%
Balance
1,256
12,592
7,445
5,147
Balance
251
403
-2,526
2,929
061
10
227
86
73
878
16
7`;ti
3,575
27,920
25,429
9.8%
West Germany
SEP 77
,
8,023
,
70,820
,
60,750
.
16.6%
Canada
AUG 77
3,300
26,646
25,332
5.2%
Balance
2,038
15,407
13,129
2,279
Balance
275.
1,274
97
1,178
5
750
47
713
42,307
12.8?0
France
SEP 77
,
5,648
,
49,822
44,537
11.9%
Balance
102
-2,108
-2,230
122
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
FOREIGN TRADE PRICES IN US $1
United States INDEX: JAN 1975 =100
Japan
105
104
West Germany
106
1,0,5
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
lExport and import plots are based on five month weighted moving averages.
A-12
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
United Kingdom
109
107
APR JUL OCT
1977
574538 11-77
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 Approve99LECTED DEVELOPINGPCOUNTRIESoo5oo01-5
MONEY SUPPLY'
INDUSTRIAL
PRODUCTION '
Average
Avera
e
A
nnual Growth
Rate Since
g
Annual Growth Rote Since
Percent Change
Percent Change
Latest
from Previous
1 Year
Latest
from Previous
I Year
3 Months
Month
Month
1970
Earlier
Period
Period
1970 Earlier
Earlier2
Brazil
May 77
1.5
36.3
41.7
Brazil
76 II
0.1
11.0 10.7
0.4
India
Jun 77
0.3
12.0
16.9
India
May 77
-0.8
5.1 2.2
10.5
Iran
Jul 77
-0.2
28.4
26.6
South Korea
Aug 77
4.7
22.7 13.6
49.3
South Korea
Aug 77
2.2
31.6
399
Mexico
Jun 77
0.8
5.9 5.5
28.0
Mexico
Jul 77
1.1
18.8
27.6
Nigeria
76 IV
0.2
11.3 9.0
0.7
Nigeria
Feb 77
5.9
35.9
54.8
Taiwan
Sep 77
7.2
15.0 12.3
-2.0
Taiwan
Jul 77
1.4
24.4
27.1
Thailand
Jun 77
-1.8
13.1
12.0
seasonally adjusted.
' Average for latest 3 months comp
ared with average
for previous 3 mo
nths.
1 Seasonally adjusted
.
'Average for latest
3 months compared with average for pr
evious 3 months.
CONSUMER
PRICES
WHOLESALE PRICES
Average
Average
Annual Growth
Rate Since
An
nual Growth
Rate Since
Percent Cha
nge
Percent Change
Latest
from Previous
I Year
latest
from Previous
1 Year
Month
Month
1970
Earlier
Month
Month
1970
Earlier
Brazil
Oct 77
2.7
27.2
42.1
Brazil
Sep 77
1.6
27.1
34.4
India
May 77
1.6
8.3
9.7
India
Aug 77
0.3
9.3
5.7
Iran
Aug 77
-0.3
12.3
30.7
Iran
Aug 77
-0.6
10.3
17.7
South Korea
Sep 77
0.3
14.5
9.2
South Korea
Sep 77
0.7
16.3
9.4
Mexico
Aug 77
2.1
14.9
34.3
Mexico
Jul 77
0.7
16.4
48.2
Nigera
Mar 77
3.4
14.9
13.6
Taiwan
Sep 77
-0.5
8.9
3.8
Taiwan
Sep 77
-1.9
10.9
10.4
Thailand
Jul 77
1.0
10.1
7.1
Thailand
Aug 77
1.1
8.7
9.9
EXPORT PRI
CES
OFFICIAL RESERVES
us $
Million US S
i
Avera
ge
Latest
Month
Annual Growth
Rate Since
1 Year
3 Months
Percent Change
End of
Million US 3 Jun 1970
Earlier
Earlier
Latest
from Previous
1 Year
Brazil
May 77
5,806 1,013
3,401
5,878
Period
Period
1970
Earlier
India
Sep 77
4,648 1,006
2,686
4,559
Brazil
Jul 77
-12.4
16.3
28.4
Iran
Sep 77
11,445 208
9,642
11,025
India
Feb 77
8.0
10.4
8.9
South Korea
Aug 77
3,765 602
2,263
3,519
Iran
Jul 77
0
35.5
18.7
Mexico
Mar 76
1,501 695
1,479
1,533
South Korea
77 II
1.4
8.7
8.5
Nigeria
Jun 77
4,663 148
5,885
4,931
Nigeria
May 76
-0.1
27.3
12.3
Taiwan
Aug 77
1,416 531
1,586
1,331
Taiwan
Aug 77
-0.3
11.8
5.3
Thailand
Sep 77
1,925 978
1,989
2,017
Thailand
Dec 76
2.0
13.3
13.1
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
Latest 3 Months
Percent Change From
3 Months I Year
Latest Period
Earlier'
E
arlier 1977
1976
Change
Jul 77 Exports
110.6
27.2
7,225
5,312
36.0%
Jul 77 Imports
22.8
-2.0
6,873
6,989
-1.7%
Jul 77 Balance
352
-1,677
2,029
Jun 77 Exports
-46.9
6.3
2,707
2,485
8.9%
Jun 77 Imports
-55.4
-5.8
2,094
2,117
- 1.1%
Jun 77 Balance
612
368
244
Iran
Aug 77 Exports
-42.5
-5.7
15,621
14,785
5.7%
Aug 77 Imports
- 18.2
-4.8
8,402
8,351
0.6%
Aug 77 Balance
7,219
6,434
785
South Korea
Aug 77 Exports
43.9
20.3
6,217
4,838
28.5%
Aug 77 Imports
16.4
18.8
6,265
5,121
22.3%
Aug 77 Balance
- 47
-283
235
Mexico
Jul 77 Exports
-44.5
22.1
2,453
1,892
29.6%
Jul 77 Imports
46.2
-22.2
2,751
3,511
- 21.6%
Jul 77 Balance
-298
-1,618
1,321
Nigeria
May 77 Exports
22.9
24.5
1,965
1,570
25.2%
Dec 76 Imports
86.7
8.4
2,531
1,990
27.2%
Dec 76 Balance
1,502
1,102
399
Taiwan
Sep 77 Exports
-28.7
9.0
6,637
5,902
12.5%
Sep 77 Imports
-13.9
6.1
5,722
5,111
11.9%
Sep 77 Balance
915
790
125
Thailand
May 77 Exports
39.8
21.1
1,506
1,210
24.5%
May 77 Imports
62.6
21.7
1,624
1,322
22.8%
May 77 Balance
-117
-112
-5
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 v For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
AGRICU AL PRICES MONTHLY AVERAGE CASH PRICE
50
1-16 NOV II
1973 1974 1975 1976 1977 0
1-16 NOV
1973 1974 1975 1976 1977
1-16 NOV I
1973 1974 1975 1976 1977
1 16 NOV 1I
1973 1974 1975 1976 1977
COFFEE /TEA
400 C PER POUND
TEA
2,000 London Auction
COFFEE
Other Milds Arabicas,
ex-dock New York
17 OCT
102.3
16 NOV
199.55
10 OCT
96.9
9 NOV
195.78
OCT 77
96.9
OCT 77
170.90
NOV 76
78.0
NOV 76
179.08
1-16 NOV lI
1977 0
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
30.0
$ PER METRIC TON
-800
SOYBEAN MEAL
$ PER TON
4009
4'4 Percent Bulk, f.o.b. Decatur
16 NOV
173.50
9 NOV
163.00
OCT 77
136.41
NOV 76
180.15
7.5.
CPYRGHT
No. 2 Medium Grain, 4% Brokens,
f.o.b. mills, Houston, Tex.
325 p PER POUND
225
125'
1-7 NOV I
11 .0 80
1977
1-16 NOV I I 100
1976 1977
$ PER METRIC TON 0$ PER POUND
.7,000 .5
19 AUG 213.50
12 AUG 225.00
AUG 77 222.22
NOV 76 150.51
II l,UVV
0
1977
16 NOV 0.2050
9 NOV 0.2000
OCT 77 0.2017
NOV 76 0.1980
SOYBEAN OIL
Crude, Tank Cars, f.o.b. Decatur
16 NOV 0.2177
9 NOV 0.1963
OCT 77 0.1876
NOV 76 0.2170
800
1-16 NOV
1974 1975 1976 1977
NOTE: The food index is compiled by the Economist for 16 food commodities
which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
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200 160
 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
INDUSTRIAL MATERIALS PRICES MONTHLY AVERAGE CASH PRICE
COPPER WIRE BAR LEAD
140 0 PER POUND $ PER METRIC TON 45 C PER POUND
16 NOV 53.4 60.6
9 NOV 53.6 60.6
OCT 77 54.8 60.6
NOV 76 58.2 70.6
1-16 NOV I I 1,000 _
1973 1974 1975 1976 1977 10
ZINC
100 O PER POUND
16 NOV
28.4
32.0
9 NOV
28.3
32.0
OCT 77
27.9
31.0
!800
NOV 76
20.8
26.0
1-16 NOV
197"7 200
TIN
$ PER METRIC TON 650 ~ PER POUND
1-16 NOV I (
n , mn
STEEL SCRAP
$ PER LONG TON
125:
PLATINUM
$ PER METRIC TON S PER TROY OUNCE
150 250
1-14 NOVII
9 NOV 574.9 623.5
NOV 76 368.6 407.7
16 NOV 167.0 174.5
9 NOV 167.0 171.5
OCT 77 167.0 156.0
NOV 76 167.0 157.5
1-16 NOV
1973 19,1'4 197 1979 - 1611
32.0
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300050001-5
CPYRGHT
ALUMINUM
Major US Producer
C per pound
53.00
51.00
48.00
41.00
US STEEL
Composite
$ per long ton
359.36
339.27
327.00
306.72
IRON ORE
Non-Bessemer Old Range
$ per long ton
21.43
21.43
20.51
18.75
CHROME ORE
Russian, Metallurgical Grade
$ per metric ton
150.00
150.00
150.00
150.00
CHROME ORE
S. Africa, Chemical Grade
$ per long ton
58.50
58.50
42.00
44.50
FERROCHROME
US Producer, 66-70 Percent
it per pound
41.00
43.00
43.00
53.50
NICKEL
Composite US Producer
$ per pound
2.10
2.40
2.41
2.20
MANGANESE ORE
48 Percent Mn
$ per long ton
72.24
72.00
72.00
67.20
TUNGSTEN ORE
Contained Metal
$ per metric ton
22,131.00
23,106.00
18,082.00
10,799.00
MERCURY
NY
$ per 76 pound flask
140.00
141.90
134.50
125.26
SILVER
LME Cash
t per troy ounce
493.12
469.85
436.90
431.93
GOLD
London Afternoon Fixing Price $ per troy ounce
166.71
146.60
130.44
142.42
RUBBER
60 0 PER POUND
INDUSTRIAL MATERIALS INDEX
300
250
200
1-8 NOV I I
1977
LUMBER INDEX6
160.
1Approximates world market price frequently used by major
world producers and traders, although only small quantities of
these metals are actually traded on the LME.
2Producers' price, covers most primary metals sold in the US.
3As of 1 Dec 75, US tin price quoted is "Tin NY lb composite."
4Quoted on New York market.
5S-type styrene, US export price.
6This index is compiled by using the average of 13 types of lumber whose
prices are regarded as "bell wethers" of US lumber construction costs.
7Composite price for Chicago, Philadelphia, and Pittsburgh.
NOTE: The industrial materials index is compiled by the Economist for 19 raw
materials which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
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