slightly weaker rate of 1. 6 %. due to improved economic activity abroad and the favourable exchange rate, exports exceeded their year - earlier level by 7. 4 %. equipment investment, which had expanded by as much as 7. 5 % in the final quarter of 2003, declined slightly due to special effects. the upswing has also made itself felt in certain domestic sectors. this is evident in private consumption, which increased by 2. 3 %. the uptrend, which had begun towards the end of last year, thus continued. surveys confirm that consumer sentiment has improved. construction investment also topped the year - earlier level by a hefty 2. 8 %. the expansion in mortgage loans by 5. 5 % confirms the revival in the construction and real estate sectors. the upswing is also evident from a stabilisation on the labour market. for the first time in five quarters employment slightly exceeded the corresponding year - back level. the job vacancies indices reveal that demand for labour is gradually rising again. the favourable overall picture is confirmed by the economic barometer of the institute for business cycle research at the swiss federal institute of technology. how do we assess economic development in the near future? for this year, we are forecasting economic growth of close to 2. 0 %. growth is therefore likely to be underpinned by both higher exports and stronger domestic demand and to lead to a gradual decline in unemployment as from the second half of 2004. towards the end of 2005, the economy should again be working close to capacity, and this will influence price formation. our inflation forecast of march already showed that, given an unchanged interest rate of 0. 25 %, inflation would exhibit a rising trend as from the second half of 2005. the reason was to be found in improved capacity utilisation and unemployment declining in step with the more favourable economic conditions. this assessment has not changed in any way. the new forecast, adjusted for the 25 basis points rise in the three - month libor, now suggests that, as from the second quarter of 2005, inflation will fall short of the figure predicted by the last forecast. it makes it clear that the normalisation of the monetary policy course now initiated improves inflation prospects. the monetary development our inflation forecast is much less certain over a longer horizon. for this period of time, it is particularly helpful to consider monetary factors. for the monetary analysis, i shall deal with the development of the money stock m3. when interest rates were last cut

philipp m hildebrand : where is productivity growth in europe? summary of a speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, to the vereinigung basler okonomen, basel, 28 october 2004. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * since 1996 the e. u. is lagging behind the u. s. in terms of productivity growth. this phenomenon has become more pronounced since 2001. the growth of gdp per work hour in the e. u. between the periods 1990 - 1995 and 1995 - 2002 is lower by two percentage points per year. this difference amounts to 2, 8 percentage points per year if one compares the periods 1990 - 1995 and 2000 - 2005. differences in gdp measurement account for roughly 0, 5 up to a maximum of 1 percentage point of the productivity growth differential. the remaining difference is caused by two factors. on the one hand, total factor productivity growth has accelerated in the u. s. this was made possible by a wideranging restructuring of the u. s. economy which provided an optimal backdrop for the new information and communication technologies. on the other hand, capital deepening in europe was lessened by employment growth. the productivity of this additional labour input has to be increased through strong educational efforts, open markets and additional investment. labour market reforms remain indispensable in order to enhance the productivity of all workers. product market reforms will be crucial in order to unleash the full productivity potential of the new technologies. increasing productivity is the key to securing our welfare and the stability of our social security systems.