Private investment and consumption are expected to continue growing at a sustained pace, whereas the impact of slower world economic growth is expected to weigh on exports, with also a transitory impact on inventories. Indeed, economic activity in the euro area is largely determined by domestic factors such as long-term financing costs and disposable income developments, which have remained favourable. Furthermore, the still high rates of capacity utilisation in the manufacturing sector, the ongoing growth in employment and continued declines in unemployment should help maintain positive growth in private investment and consumption. Employment in the euro area is estimated to have increased by 0.6% in the first quarter of 2001, compared with the previous quarter, confirming continued solid job growth creation over the recent months. Notwithstanding sustained reductions in the aggregate unemployment rate and relatively rapid employment growth, wage increases in the euro area have so far remained moderate. Per capita nominal compensation of employees grew by 2.0% in 1999 and by 2.4% in 2000, while unit labour costs increased by 1.3% and 0.9%, respectively. There are a number of factors that help to explain why the increases in oil prices and their impact on inflation have not influenced wage developments in a period of falling unemployment. They include the employers and the general public’s confidence in the capacity of the ECB to ensure price stability. It is crucial that social partners continue the process of wage moderation seen in the past.
Jean-Claude Trichet: Views on recent economic developments in the euro area and international financial architecture Address by Mr Jean-Claude Trichet, Governor of the Banque de France, at the Institute of International Finance Spring Membership Meeting held in Hong Kong on 1 June 2001. *  *  *  Ladies and Gentlemen, It’s a great pleasure for me to share some views with such a distinguished audience on two topics of great importance: the first one deals with recent economic developments in the euro area and the motivations of the last 25bps rate cut by the ECB on its 10 May’s meeting. The second point deals with the very important question of international financial architecture. Let me start with the first topic. The global outlook for 2001 continues to be characterised by sizeable uncertainties, amid the readjustments taking place in the American and Japanese economies, and their impact on the rest of the world. In the United States, however, while the GDP growth estimate for the first quarter of 2001 indicates that the slowdown has been substantial, the economy is still driven so far by firm consumer expenditure. Economic activity in the euro area in 2000 expanded at an annualised rate of 3.4%, the strongest growth since 1990, driven by buoyant domestic and foreign demand. The general outlook for this year and next one remains positive, even if, clearly, some impact of the American slowdown is already visible.