5 % that had implemented reshoring measures. [ 18 ] at the same time, companies moved away from relying on “ just - in - time ” supply chain management towards a “ justin - case ” approach. less than 15 % of companies were relying on “ just - in - time ” deliveries by the end of last year. however, diversification is likely to have limits – and this brings me to the second shift, which is from efficiency to security. in recent years we have seen a shift towards new industrial policies, mainly led by china and the united states, in which geopolitical biases are being introduced into strategic supply chains at the expense of efficiency considerations. the us administration has explicitly identified “ friend - shoring ” as a policy goal in its recent supply chain strategy. now, the war may prove to be a tipping point for europe and other regions too, making the alliances to which suppliers ’ countries belong more important. international firms will still face strong incentives to organise production where costs are lowest, but geopolitical imperatives might restrict the perimeter in which they can do so. for strategic industries such as semiconductors or pharmaceuticals, the very limited reshoring of supply chains we saw during the pandemic will probably change as a deliberate result of public policy. europe, for example, is aiming to double its share of the global market for semiconductor production to 20 % by 2030. but even industries that are not considered strategic are likely to anticipate the fracturing of the global trading order and adjust production themselves. a recent survey found that 46 % of german companies receive significant inputs from china. of those, almost half are planning to reduce their dependency on china. [ 22 ] in the united states, almost 40 % of members of the us - china business council have moved sourcing due to uncertainties about supply. for energy and critical raw materials, increasing security will require a different strategy. after all, these resources are distributed unevenly around the world, and cannot be substituted with domestic alternatives. regions will increasingly have to source their critical inputs from a smaller pool of potential suppliers that are deemed reliable and in line with their shared strategic interests. and they will need to do so in the context of a green transition that is making certain raw materials – like copper, cobalt and nickel – increasingly more important than others. a new geopolitical race to secure access to resources is therefore likely. achieving greater security will not come without costs, and this is why the third

information on activity in the third quarter – coming from various confidence surveys and indicatorbased estimates – continues to support the assessment that economic activity will grow robustly while possibly moderating somewhat. looking ahead to the remainder of 2006 and 2007, the conditions remain in place for the euro area economy to grow at solid rates around potential, with some volatility in the quarterly growth rates likely to emerge around the turn of the year. global economic activity has become more balanced across regions and is still robust, thereby providing ongoing support for euro area exports. investment is expected to remain strong, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong earnings, and gains in business efficiency. consumption growth in the euro area should also strengthen further over time, in line with developments in real disposable income, as employment conditions continue to improve. risks to the outlook for economic growth are broadly balanced over the shorter term, although the recent fall in oil prices – if it were to prove lasting – has the potential to lead to somewhat stronger demand and output growth than embodied in our baseline scenario for activity in the coming quarters. over the longer term, risks to growth lie on balance on the downside, and relate mainly to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures, especially after the suspension of the doha round of trade talks, and possible disorderly developments owing to global imbalances. as regards price developments, according to eurostat ’ s flash estimate, annual hicp inflation fell to 1. 8 % in september 2006, from 2. 3 % in august. although no detailed breakdown is available as yet, this relatively sharp decline seems to be the combined result of favourable base effects, given in particular the strong rise in oil prices a year ago, and the recent significant fall in oil prices. while the outlook for energy prices is uncertain, on the basis of current energy prices and the higher quotations on futures markets, overall inflation rates are likely to increase again towards the end of the year and in early 2007. as a consequence, we expect a considerable degree of short - term volatility in the annual hicp inflation rate, while the overall inflation rate will remain elevated at levels above 2 % on average in 2006 and is likely to remain so in 2007. in addition, risks to the outlook for price developments remain clearly on the upside. they continue to include a stronger pass - through of past oil price rises into