Such price increases are all the more remarkable given that these prices had tended to stagnate in recent years. This jump in the price of commodities was mainly attributable to the continuous growth in domestic demand in the emerging markets and low extraction and production capacity. In our opinion, this situation is not likely to change in any direction in the short term. Although partially offset by the weak US dollar, the rise in the oil price during the final quarter of 2007 triggered a sharp increase in inflation – from 0.7% in September to 2% in December. The price rises of other commodities were also significant, but they only had a minor impact on inflation in Switzerland. In fact, commodities are not directly included in the reference basket used to calculate the price index, which means that their price increases only had a minor impact in this respect. However, the indirect effects, i.e. higher prices for goods and services as a result of higher production costs, constitute a much more serious inflationary risk. Having said this, the related impact last year was modest because many companies chose not to pass on their higher costs to consumers, given the considerable competitive pressure in numerous markets. Moreover, the relatively moderate increase in wage costs and gains in productivity over the last few years allowed companies to absorb a good part of the additional costs they had incurred as a result of higher commodity prices.
Jean-Pierre Roth: Review of the Swiss economy in 2007 and the outlook for 2008 Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the General Meeting of Shareholders of the Swiss National Bank, Berne, 25 April 2008. *  *  *  Mr President of the Bank Council Dear Shareholders Dear Guests As history has shown, and the President of the Bank Council has reminded us just now, celebrations to mark our various anniversaries have often taken place amid difficult circumstances. Such was the case in 2007, when confidence in the quality of numerous financial products began to fade from August onwards in the wake of the US real estate crisis – subsequently placing a substantial provisioning burden on international banks and leading to a crisis of confidence on the markets. A worsening of the economic outlook and major stock market corrections then ensued. Nevertheless, 2007 as a whole can still be regarded as a successful year in economic terms, with global economic growth settling in at around 5%. This excellent performance is mainly attributable to the continued momentum of the emerging economies, notably in Asia, although favourable financial conditions also played a positive role until the middle of the year. Global economic performance was less homogeneous than in 2006, however.