1985=100 160  160  140  140  120  120  100  100  80  80  60  60  40  40  20  20  0 1990  0 1992  1994  1996  1998  2000  2002  Sources: EcoWin/Conference Board and NBER SG Gausdal 31.01.03  In the US, consumer confidence has weakened since the autumn of 2000. Growth in the US has been sustained over the last year, fuelled by low interest rates, an expansionary government budget and growth in private consumption. Business investment and net exports have made a negative contribution. A new package of measures, including tax cuts and higher government transfers, has recently been presented in order to stimulate the US economy and prevent a recession. However, growth in the US will probably remain low this year. Industrial confidence in the euro area and the German IFO index Monthly figures. Seasonally adjusted  15  110  10 5  IFO business climate (righthand scale)  0  100  -5 90 -10 -15 80  -20 -25 -30 1995  Euro area (left-hand scale)  1996  1997  1998  1999  2000  2001  2002  70 2003  Sources: EcoWin, EU Commission and IFO SG Gausdal 31.01.03  Monetary policy in Europe has become more expansionary. Since the presentation of Norges Bank’s Inflation Report on 30 October, key rates have been reduced by 0.5 percentage point in Sweden and the euro area.
December 1995=100  Oslo Stock Exchange Benchmark  300 275 250 225 200 175 150 125 100 75 50 25  S&P 500  03  n  n  n  n  n  n  n  Ja  Ja  Ja  Ja  Ja  Ja  Ja  02  01  00  n Ja  99  97  98  Oslo Stock Exchange IT  96  300 275 250 225 200 175 150 125 100 75 50 25  Source: EcoWin SG Gausdal 31.01.03  Many other countries also experienced a period of strong expansion in the 1990s. Economic growth in the US was particularly high. New technology generated optimism and laid the basis for strong investment growth. At the same time, wage growth and inflation remained low. Equity prices, however, rose sharply just before the turn of the millennium, particularly in the US, but also in many other countries. 1  The output gap, which is a reflection of capacity utilisation in the economy, is measured by different methods: the trend GDP method (the HP method) and the potential GDP method (the production function method). When using the HP method, adjustments are made for the increase in vacation days in 2001 and 2002. This is also taken into account when applying the production function method. The output gap is zero if aggregate output is equivalent to the level of activity that can be achieved over time without generating a rise in price and cost inflation.