Economic Report of the President

stabilized in mid-1980, inflation rates peaked and then began torecede in the second half of the year. On current projections, andassuming that oil prices do not again rise sharply, a continued reductionin inflation rates is in prospect for most countries during 1981 —indeed, a somewhat more rapid reduction abroad than in the UnitedStates (Table 30).Chart 11Wage and Price Changes in Seven Major CountriesPERCENT CHANGE FROM 4 QUARTERS EARLIER2520HOURLY EARNINGS_ IN MANUFACTURINGr-CONSUMERPRICES0, I • , • I , . . I • . . I , . . I • • . I . , . I , , . I , . , I , t •1971 72 73 74 75 76 77 78 79 80NOTE.—INCLUDES UNITED STATES, JAPAN, GERMANY, FRANCE, UNITED KINGDOM, ITALY,AND CANADA.SOURCE: ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT.Substantial differences among the major countries will persist,however. At one extreme, inflation rates in Germany and Japanduring 1981 are likely to return to the moderate levels that wereachieved in 1977-78. On the other hand, relatively high inflation islikely to persist in a number of other countries—especially Italy, butalso the United States, France, and Canada—where wage rigiditiesappear to be more significant. In the United Kingdom, the continuedadherence to restrictive fiscal and monetary policies, the strength ofthe pound, and substantial slack in labor and product markets appearto be causing a rapid decline in inflation from the high levels reachedin 1979 and early 1980. But even so, inflation in the United Kingdomwill remain relatively high.188