Looking further ahead, and taking into account temporary effects, the Governing Council continues to expect real GDP to grow at a moderate and still uneven pace over time and across economies and sectors of the euro area. Ongoing growth at the global level and its impact on the demand for euro area exports, together with the accommodative monetary policy stance and the measures adopted to restore the functioning of the financial system, should continue to support the euro area economy. However, the recovery in activity is expected to be dampened by the process of balance sheet adjustment in various sectors and labour market prospects. In the Governing Council’s assessment, the risks to the economic outlook are broadly balanced in an environment of uncertainty. On the upside, the global economy and foreign trade may recover more strongly than is now projected, thereby further supporting euro area exports. On the downside, concerns remain relating to the emergence of renewed tensions in  BIS Review 104/2010  1  financial markets, renewed increases in oil and other commodity prices, and protectionist pressures, as well as the possibility of a disorderly correction of global imbalances. With regard to price developments, euro area annual HICP inflation increased to 1.7% in July, according to Eurostat’s flash estimate, from 1.4% in June, most likely owing to upward base effects in the energy and food components. In the next few months annual HICP inflation rates are expected to display some further volatility around the current level.

However, from a historical point of view, it is only when technological advances have made a general impact on the production process that productivity gains will arise. The steam engine moved production from household to factory, the railway enabled wider markets to develop and electricity brought the conveyer belt. Computers and the internet enable a more effective flow of information at almost all stages; financing, projection, follow-up, stock management, procurement, negotiation, auction, verification, invoicing, auditing, requisitioning and distribution. Furthermore, the improved access to information contributes to a reduction in the risks when outsourcing parts of the company’s operations. More efficient markets - the “naked economy” Increased access to information means that the markets - the matching processes between buyers and sellers - also become more efficient. Some people therefore call the new economy the “naked economy”. We can use the internet to search for products and compare prices, which brings down transaction costs and new companies find it easier to get into the market. A good example of this is how the matching process on the labour market is facilitated by information technology. In the USA around 80% of personnel managers are said to use the internet and one of the largest employment agencies on the internet advertises more than one million jobs.1 Four hundred of the world’s 500 largest companies use web sites in their recruitment process. These internet employment agencies probably reduce the search costs and facilitate the matching process - reducing what is known as friction unemployment.