expected from their central bank, that achieving it is taken for granted. even our regular exchanges of views have sometimes dealt less with the “ m ” than with the “ e ” of emu! 2 ) economic and monetary developments achieving price stability through alertness and fierce independence sets the framework for our day - to - day actions. in this context, let me report on recent economic and monetary developments. note that as we have entered the purdah - period, nothing i say has any bearing on upcoming monetary policy decisions. we expect real gdp growth in the euro area to be very moderate in the second half of this year. growth is dampened by a slowing pace of global growth, by declines in equity prices and business confidence, and by continuing tensions in segments of financial markets as well as in some sovereign debt markets. the more moderate economic outlook is confirmed in the ecb ’ s september projections. the risks to the economic outlook, which previously were balanced, are now on the downside, mainly relating to tensions in some financial markets. turning to prices, inflation was 2. 5 % in august, and rose to 3 % in september according to the eurostat flash estimate, almost exclusively as a result of oil price developments. we expect inflation to stay above 2 % over the coming months. next year, it should fall below that level, depending on commodity price and wage developments. this pattern is also reflected in the latest ecb projections of inflation ranging between 1. 2 % and 2. 2 % next year. the risks to the medium - term outlook for inflation were broadly balanced in the eyes of the governing council in its last meeting, whereas before they were seen as being on the upside. our monetary analysis indicates that the underlying pace of monetary expansion remains moderate. liquidity accumulated prior to the period of financial market tensions continues to be ample but recent data indicate that part of it may be held more for precautionary reasons than for spending. finally, in the context of our continuing analysis of the euro area economy, let me draw your attention to today ’ s release of the 2011 structural issues report. this deals with structural features of distributive wholesale and retail trade and their impact on prices in the euro area. the distributive trade sectors are not only economically important in their own right, but also relevant to monetary policy. ultimately, it is retailers who set the prices of most consumer goods and they are a key interface between producers and consumers. i very

increases in participation rates and employment. and this appears even more urgent if we consider that, over the same period, europe ’ s growth performance has been constrained by its low rate of population growth and the ageing of its society. as regards demographic trends, the working age population of the euro area grew by an average of 0. 4 % per year over the period 1996 - 2006, compared with 1. 3 % in the united european commission – ameco database. european commission – ameco database. eurostat. states. 4 these demographic trends therefore account for 0. 9 percentage point of the euro area - us growth differential, “ in favour ” of the us. taken together, labour utilisation and demographic trends can explain 0. 5 percentage point of the difference between the growth rates of the united states and the euro area, “ in favour ” of the us. on the basis of a 1. 1 percentage point difference in annual average growth between the us and the euro area over the period 1996 - 2006, the remaining differential of 0. 6 % for real gdp growth indeed stems from annual average labour productivity growth of 1. 3 % in the euro area and 1. 9 % in the united states. it is true that the positive labour supply shock over the past decade might have contributed to the disappointing productivity growth seen in the euro area. however, standard growth accounting analyses show that developments in labour supply are only part of the story. the slowdown in labour productivity growth can be attributed to a large extent to a marked deceleration in total factor productivity. those countries that have tended to compensate for the positive labour supply shock by increasing investment growth and / or exploiting the potential efficiency gains offered by new technology in particular have enjoyed stronger labour productivity growth. for instance, over the period 1996 - 2005 the direct contribution of ict to labour productivity growth, as measured by the contribution of ict capital services, has in the united states been roughly double that observed in the euro area ( 0. 63 percentage point in the united states, compared with 0. 37 percentage point in the euro area ). similarly, hourly labour productivity growth in ict manufacturing and service sectors 5 grew by an average of 12. 6 % and 6. 5 % in the united states and the euro area respectively over that period. 6 there could, of course, be many reasons for this decline in total factor productivity growth rates, and this conference has been useful in shedding light on some explanatory factors.