exporting more challenging, with knock - on implications for wages and prices here. that would come against the backdrop of a 5 ½ per cent sterling appreciation on a tradeweighted basis in the last year ( chart 9 ), which has extended the currency ’ s appreciation to around 17 per cent since its trough two years ago. these moves are reinforcing the disinflationary impulse from abroad, which could take a while to pass through to the sterling prices in the shops. 14 5. getting back to target in the uk all of this puts a premium on generating the domestic inflation necessary to return inflation to the target. we are on track to do that. the uk economy is performing well. uk growth is solid, unemployment is coming down, and jobs have risen by 600, 000 in the past year. wage growth is showing signs of picking up, rising to 3 % for the economy as a whole at the end of last year, and to 3. 3 % in the private sector. 15 average hours worked continue to recover on a strong upward trend. and firms ’ labour costs grew an estimated 1. 3 % in the last quarter of 2014, close to core inflation. consumer confidence and retail sales growth are at their highest in over decade. similarly real income growth is on course to be the strongest for more than a decade. firms ’ investment intensions are robust. surveys point to solid growth consistent with trend. there is little evidence of a deflationary mindset setting in. that reflects an excess of saving over investment. that in turn reflects a combination of factors including the protracted process of balance sheet repair in both public and private sectors, and more secular factors like demographics ( ageing and slower population growth ), the higher steady state costs of financial intermediation relative to the pre - crisis period, and, possibly, lower productivity growth, as a consequence of lasting scars from the crisis. see carney, m ( 2013 ), “ the spirit of the season ” at the economic club of new york ; and box on page 42 of bank of england ( 2014 ), inflation report, august. protracted pass - through, generated by stickiness in the domestic price of imported goods, challenges the classical view that the exchange rate provides an efficient shock - absorber in the face of foreign shocks. these figures refer to the quarter - on - quarter annualised growth rate of the average weekly earnings series. bis central bankers ’ speeches with domestic demand growing at around 3

need for government intervention. however, the banks are suffering from the protracted economic recession. to preserve their ability to finance the economy, they must take full advantage of the scope for increasing efficiency. bis central bankers ’ speeches 2. credit and the banking system the deleterious spiral linking the sovereign debt crisis, banks ’ access to funds, credit availability and economic growth must be broken once and for all. the measures decided by the ecb governing council, together with those adopted by governments at national and european level, are already having positive effects. but we still have not reached a definite turning - point. the growth of bank lending remains negative. in the three months to september the annualized contraction in loans was 3. 5 per cent for firms and 0. 8 per cent for households. the weakness of demand has weighed increasingly on the recent trend in credit. firms are cutting back on investment, given the unfavourable economic prospects, while households are cautious in the face of the uncertain trend in the housing market and the difficulties for income and employment. but supply - side conditions that are still restrictive, though an improvement on the exceptional tensions registered in late 2011 and early 2012, also continue to be factor. in the bank lending survey conducted at the start of october for the third quarter of this year, the banks relate the tightening of supply to the poor economic situation and the consequent increase in credit risk. the surveys of firms give mixed signals of the speed at which the credit tightening is unwinding. in the quarterly survey carried out by the bank of italy together with il sole 24 ore, the percentage of firms indicating a deterioration in their conditions of access to credit declined to about 26 per cent in september, from 33 per cent in june ; whereas the monthly istat survey showed a new increase. the reduction in official rates in july has had positive effects on the cost of credit. bank lending rates came down over the summer by 0. 3 percentage points both on new loans to firms and on new mortgage loans to households, to 3. 5 and 3. 9 per cent respectively in september. a contributory factor was the narrowing of the yield spread between italian and german government bonds following the announcement of new interventions by the ecb on the sovereign debt market. however, the cost of business loans is still higher than in germany and in the euro area as a whole ( by 1. 1 and 0. 8 percentage points respectively ) ; before the summer of 2011 the differential was practically nil