Economic Report of the President

Rather, the German current account shifted from a surplus of about$9 billion in 1978 to an estimated deficit of $17 billion in 1980. TheJapanese current account also moved sharply, from a $17-billion surplusin 1978 to an estimated $13-billion deficit in 1980. This shiftreflected not only higher oil payments but also the adverse shorttermeffect of yen depreciation during 1979 and the first quarter of1980 on the nominal trade balance. These two effects more thanoffset the strong Japanese trade performance, in volume terms,during the past year.TABLE 29.—Current-account balances in major industrial countries, 1978-81[Billions of U.S. dollars >]United StatesJapan . , .GermanyFranceUnited KingdomItalyCanada . .Other OECDTotal OECOCountry1978-14.316.58.73.71.26.2-4.4-8.79.01979-0.8-8.8-5.51.2-3.95.1-4.4-18.4-35.51980 2 198135y219%-13V4-6%-17V4-IOV2-7%-6>/44%4>/4-5V4-2>/4-3%—3-37-35V4-73 l / 2 -401 Current account balances inclusive of official transfers.2 Preliminary OECO estimates.3 OECO projection.Source: Organization for Economic Cooperation and Development (OECD).By contrast, the current account of the United States improved byan estimated $20 billion over this same period, as discussed morefully in Chapter 3. Similarly, the United Kingdom moved into substantialsurplus during 1980, both because that country has becomelargely self-sufficient in oil—so that its trade account was not stronglyaffected by the rise in oil prices—and because the recession has beenrelatively more severe in the United Kingdom than elsewhere, thuslimiting imports.INFLATIONThe different pattern of absorption of the recent oil-price shockcompared to the earlier one shows up clearly in the movements ofwages and prices. Chart 11 traces the movements of consumer pricesand hourly earnings in manufacturing over the past decade for themajor industrial countries. As measured by consumer prices, rates ofinflation outside the United States tended to decline during 1978 tolevels comparable to those prevailing in the early 1970s—thoughwith substantial dispersion among countries. But consumer price inflationaccelerated everywhere during 1979 and into 1980 under theimpact of higher energy prices. In sharp contrast to the earlierperiod, however, hourly earnings accelerated only moderately, andlagged behind consumer prices in almost all countries. As oil prices187