As a consequence, world GDP and world trade are estimated to have fallen at an annualised rate of about 6% and 25% respectively in 2008Q4. Banking contributed to a Great Recession on a scale last seen at the time of the Great Depression. Yet the official statistics on the contribution of the financial sector paint a rather different picture. According to the National Accounts, the nominal gross value-added (GVA) of the financial sector in the UK grew at the fastest pace on record in 2008Q4. As a share of wholeeconomy output, the direct contribution of the UK financial sector rose to 9% in the last quarter of 2008. Financial corporations’ gross operating surplus (GVA less compensation for employees and other taxes on production) increased by £ to £ also the largest quarterly increase on record. At a time when people believed banks were contributing the  BIS Review 95/2010  1  least to the economy since the 1930s, the National Accounts indicated the financial sector was contributing the most since the mid-1980s. How do we begin to square this circle? That is the purpose of this chapter. It is planned as follows. In Section 2, we consider conventional measures of financial sector value added and how these have evolved over time. In Section 3, we consider a growth accounting breakdown of the factor inputs which have driven growth – quantities of labour and capital and the returns to these factors.
In addition, the severe supply-chain bottlenecks that initially affected this category began to improve last year, which likely contributed to the easing of prices for some durable goods in recent months. However, there are factors that may throw sand in this gear going forward. The economic resiliency of Europe and a rebound in growth in China following the end of COVID restrictions will likely increase global demand for goods. And further improvement in global supply-chain disruptions has stalled over the past few months. For example, the New York Fed's Global Supply Chain Pressure Index remains elevated relative to pre-pandemic levels. The slowest gear to turn is the one that represents non-energy services. It's influenced by the balance of overall supply and demand, and it will take the longest to rotate at the right pace for low and stable inflation. One area where we are seeing signs of this gear turning is in shelter costs. After a sharp rise, we have seen a steep decline in the rate of increase in new lease rents. Assuming this trend continues, we should see a slowing of overall rent inflation during this year. That said, we have yet to see the gears turn for inflation of non-energy services excluding housing, which is still quite elevated, averaging 3-3/4 percent over the most recent six months. Tightening Monetary Policy Taking into account the different speeds the gears are moving, it is clear that overall demand remains well in excess of supply, and inflation is running far above our 2 percent target.