1990=100  110  110  105  105  100  100  Local currency  95  95 Common currency  90  90 1990 1992 1994 1996 1998 2000 2002 2004  Sources: TRCIS, Ministry of Finance and Norges Bank  14  BIS Review 11/2004  The fall in the value of the krone over the past year has strengthened the Norwegian business sector. The business sector is, however, still feeling the effects of a sharp rise in labour costs over a period of several years. Relative labour costs measured in a common currency are in line with the level prevailing in 1990, but approximately 10 per cent higher than in the mid-1990s. The internationally exposed sector has been scaled back. Those companies that are currently operating may be in a better position to bear the high wage level. Nevertheless, costs may limit activity and employment. Growth in the Norwegian economy picked up again through the summer of 2003. In the period ahead, solid growth in household income, subdued consumer price inflation and low interest rates will provide the conditions for high growth in private consumption. There is optimism in the building and construction sector. High petroleum investment is also supporting activity while mainland business investment has been low for a long period. The number of persons employed began to increase in the summer of 2003 and unemployment stabilised.

5  David Miles (2011), “Mortgages and Housing in the Near and Long Term”, http://www.bankofengland.co.uk/publications/speeches/2011/speech488.pdf  4  BIS central bankers’ speeches  The Economic Outlook CML Mortgage Industry Conference London Charlie Bean, Deputy Governor Monetary Policy 03 November 2011  BIS central bankers’ speeches  5  Chart 1: UK activity Real GDP  PMI surveys  Percentage increase on a quarter earlier  1.2  CIPS services ouput CIPS manufacturing output  Index, 50 = no change 65  0.9 60  0.6 0.3  55  0 50 -0.3 -0.6 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3  45 Jul 09  Jan 10  Jul 10  Jan 11  Jul 11  Chart 2: International activity Composite PMI surveys  Real GDP Percentage change on a quarter earlier  US Euro area  1.2  Index, 50 = no change US  1  Euro area  65  60  0.8 55 0.6 50  0.4  45  0.2 0 2009 Q3  6  2010 Q1  2010 Q3  2011 Q1  2011 Q3  40 Jul-09  Jan-10  Jul-10  Jan-11  Jul-11  BIS central bankers’ speeches  Chart 3: Euro-area sovereign and banking risks CDS-based bank default risk  10-year government bond spreads  Basis points  Percentage points Portugal  Ireland  Italy  Spain  France  UK  12  800  Austria, Belgium, France, Germany and Netherlands  10  Greece, Ireland, Italy, Portugal and Spain  8  UK  6  US  600  400  4 200 2 0 Jan 10  Jul 10  Jan 11  Jul 11  0 Jan 10  Jul 10  Jan 11  Jul 11  Chart 4: Change in net exports after big sterling moves Percentage point contribution to GDP 3.0 1996 Q1 (22%) (inverted) 1992 Q2 (-14%)  2.0  2007 Q2 (-25%) 1.0  0.0  -1.0 -6  -4  -2  0  2  4  6  8  10 12 14 16  Quarters before/after start of exchange rate movement  BIS central bankers’ speeches  7  Chart 5: Output losses after banking crises Percent of pre-crisis trend; mean difference from year t = - 1 20 10th-90th percentile Interquartile range Estimated mean path  UK  10 0 -10 -20 -30 -40  -1  0 1 2 3 4 5 6 7 Distance in years from the first year of crisis  * UK observation for year 3 based on Q1-Q3 data for 2011  Chart 6: UK inflation Per cent Estimates of VAT, energy and import price contribution  7 6 5  CPI inflation  4 3 2 1 0  - CPI estimates excluding - VAT, energy and import price contribution 2008 2009  8  -1 -2 -3 2010  2011  BIS central bankers’ speeches  Chart 7: Commodity prices Index: Jan 2010 = 100  180  Oil Metals  160  Agricultural 140  120  100  80 Jan 10  Jul 10  Jan 11  Jul 11  The Economic Outlook CML Mortgage Industry Conference London Charlie Bean, Deputy Governor Monetary Policy 03 November 2011  BIS central bankers’ speeches  9