A second reason to remain alert is that despite the recovery in growth and employment, the persisting output gap is still keeping inflation dynamics weak. The October inflation rate stood at 0.5%. While this marks the highest level recorded in almost two years, it remains far below the ECB’s objective.
2 In assessing the degree to which shortages of materials and other inputs are constraining goods production, I have been following the Quarterly Survey of Plant Capacity Utilization, which asks firms whether production in their plants was below full capacity in a particular quarter and the reasons for any shortfalls (figure 4).