In particular, the sharp decline in European gas prices reflects unusually mild weather, together with energy-saving measures and strong inventory levels which mitigate supply risks for next winter. The commodity market tensions in 2022 were caused by the Russian invasion of Ukraine and, therefore, a prolongation of the war is still a major source of uncertainty for Europe. And, more generally, the future course of the world economy is also a matter of concern, against a backdrop of global monetary policy tightening and significant geopolitical risks. Second, in relation to the recent stress in the banking sector, so far the implications have been contained, leading to a certain tightening of overall euro area financial conditions, mainly through its impact on risk premia2. However, should they persist or heighten, these tensions could lead to a sharper than expected tightening of credit conditions and erode confidence and give rise to a scenario of more moderate economic growth and more rapidly declining inflation. A third element that adds a certain degree of complexity to the inflation outlook relates to fiscal policy. In 2022 and 2023, euro area countries significantly increased their fiscal policy support measures to protect businesses and households from rising energy prices and inflation, bringing the total gross stimulus to close to 2% of euro area GDP in both years. While these measures helped to contain inflation in 2022 and are expected to do so in 2023, the extent of their impact this year is still uncertain.
As regards producer prices of imported goods, these have dropped since the end of 2002. This partly reflects the more or less continuous strengthening of the krona between 2001 and 2004, which has had an impact on the prices with a slight lag. Moreover, consumer price inflation in the international market was muted during the last economic slowdown. We have also seen a rise in the share of imports from low-cost countries, which has also contributed to the low rate of price increases for consumer goods. The effect of this shift towards cheaper import countries is not fully captured, however, by the method that we so far have used to forecast import prices. This could be one reason why our forecasts have not completely managed to predict the fall in import prices. This is a problem that we are working on at the moment. The distribution sector also important for inflation The prices of consumer goods have fallen more than the aggregate producer prices of imported and domestic goods. That is because consumer goods prices, in a second step, are also affected by what happens in the distribution sector, i.e. the part of the business sector that distributes goods from producers to consumers. It is difficult to find comprehensive data for the distribution sector, but we have seen that unit labour costs in the sector that includes transportation fell in 2004.