- rounders we could no longer do without in our everyday life. today, smartphones also double up as cameras, navigation systems, game consoles, diaries, address books, pocket calculators and much more, all on one single device. although we cannot yet fly to the moon using our mobile phones, smartphones do, however, contain a memory chip which is several hundred thousand times larger than that used in the computer on board the apollo 11 mission, which was sufficient to take the first human beings to the moon back in 1969. this increase in the number of functions has also led to rapid growth in their distribution : there are now more mobile phones in the world than people. and yet the success story of the smartphone is just one example of the transformative power of digitalisation. let's just look at the way we communicate with each other, keep ourselves informed or do our shopping today : so 1 / 8 bis central bankers'speeches much has changed in recent years that it would be easier to list what has actually stayed the same. the increasing use of digital technologies is also taking companies and employees into a new, digital age. these developments are the focus of this year's conference. from a central bank ’ s perspective, the change process raises the question of the overall economic implications. in other words, what does the digital revolution mean for growth, employment and price developments? i would like to take a closer look at these aspects with you today. 2 impact on productivity “ productivity isn ’ t everything, but in the long run it is almost everything. ” this quote by paul krugman emphasised the fact that a higher standard of living in the long term hinges on an economy's ability to boost its productivity. 1 and this is where technological progress through digitalisation comes into play. this initially involves companies in the digital economy, such as manufacturers of telecommunications technology, software developers or service providers in the it sector. labour productivity is growing much faster in this sector than in the economy as a whole. although the share of these companies in terms of total value added is still rather small in germany, this sector does make a significant contribution to overall economic productivity growth : since the mid - 1990s, it has averaged a quarter of a percentage point per year. in other economies, such as in sweden, finland and some industrialised countries outside europe, the contribution was significantly higher. digital technologies are also breaking into other industries and changing products and processes there, too. we have noticed

##y 1 - 1 / 2 percentage points from u. s. real gdp growth. my sense is that the optimistic growth forecasts for the united states for the next year do not rely on anything more than a modest increase in growth in the rest of the world. of course, to the extent that unanticipated strength abroad materializes and raises demand for u. s. exports, the outlook here will improve further. finally, a word on long - term interest rates, which as you know have been rising. at current levels, bond yields do not pose a major risk to continuing strength in housing or the recovery in corporate investment, in my view, though they may well end the boom in mortgage refinancing activity. since those consumers who had the most to gain from refinancing have mostly already done so, a slowdown in refinancing is unlikely to have a significant effect on household spending. the forecast through 2004 : inflation i turn now from the forecast for real activity to the outlook for inflation. as before, i will both compare the various published projections and talk about some risks to the forecast. inflation has been quite low, of course, and the private - sector forecasters expect inflation to remain low for the rest of this year and next. as table 1 shows, forecasts for cpi inflation for the second half of 2003 ( the average of third - and fourth - quarter inflation forecasts, at an annual rate ) by global insight, blue chip, macroeconomic advisers, and the survey of professional forecasters are tightly clustered in a range of approximately 1 - 1 / 4 percent to 1 - 1 / 2 percent. ( i will not comment here on forecasts for inflation as measured by the gdp price index, also shown in table 1, other than to say, as you can see for yourselves, that they are also quite low. ) the same four sources report cpi inflation forecasts for 2004, fourth quarter over fourth quarter, of between 1 - 1 / 4 and 2 percent. for monetary policy purposes, one is often interested in measures of underlying inflation. one such measure is so - called core cpi inflation, defined as the rate of change of the consumer price index excluding food and energy prices, which tend to be relatively volatile. i was able to find a core cpi inflation forecast only for macroeconomic advisers. macroeconomic advisers expects core cpi inflation for 2004 to be 1. 5 percent, compared with an expectation of 1. 3 percent for overall