long period of expansion, international financial markets were marked by unrest around the end of february. it is still too early to say whether the turbulence signals a weakening of global growth prospects. increased integration of china, india and other emerging economies into world trade, in conjunction with lower tariffs and reduced trade barriers, has led to a decline in prices for imported finished goods. this effect has been strengthened by a significant increase in the share of imports from low - cost countries. for example, clothing and footwear, audiovisual equipment, furniture and white goods have shown very strong price declines. low prices for imported consumer goods, combined with high prices for our commodity exports, have resulted in a strong improvement in norway ’ s terms of trade. since 2002, the terms of trade have improved by about 40 per cent. a similar situation has not been seen since world war i, when earnings in the shipping industry and other export industries were exceptionally high for a period. the supply of foreign labour has increased markedly after eu enlargement in 2004. over the past two years, these labour inflows have accounted for more than 30 per cent of growth in our labour force. norwegian companies have also been able to be considerably bolder in undertaking new assignments and investments knowing that they can procure labour throughout europe. in addition to increased labour inflows from poland, lithuania and other central european countries, we have long benefited from inflows of labour from sweden. many workers are on temporary assignment and their consumption is primarily concentrated in their home country. the norwegian economy has seen a net capacity increase. inward labour migration delayed the fall in unemployment in this expansion. it has also reduced bottlenecks in the economy and curbed the impact of the fall in unemployment on wage growth. labour inflows have also had a dampening effect on wage growth, probably because the wage level of foreign workers is somewhat lower than for norwegian labour. moderate wage growth has reduced labour costs ’ share of mainland business - sector income, particularly in tradable goods sectors. in manufacturing, the wage share has shown a trend fall since the mid - 1990s and the level has been the lowest since 1970 in the past few years. the wage share has fallen also in many other oecd countries. emerging economies ’ entry into global trade has resulted in a sharp increase in the supply of labour. the result has been a fall in the global price of labour relative to the return on capital. the wage share equilibrium may therefore have been reduced

are reports of limited capacity in most regions. the number of unfilled vacancies is rising, and labour shortages are reported in almost every occupational category. there are shortages of drivers, pre - school teachers, supervisors, engineers, carpenters, architects, auditors, accountants, it personnel and health workers. it has probably not been since the 1970s that we find such widespread reports of purely physical production constraints, for example now in the form of shortages of rigs and other equipment in the petroleum industry or shortages of plank, concrete and insulation in the construction industry. unemployment has fallen markedly over the past year. the pace of decline and the level of unemployment are reminiscent of two earlier cyclical peaks, one in the mid - 1980s and the one that began at the end of the 1990s and continued into the present decade. both booms culminated in sharply accelerating cost and wage inflation. supply - side shocks to the norwegian economy the combination of strong growth, high capacity utilisation and low inflation is a reflection of favourable global developments and a number of positive supply - side shocks to the norwegian economy. the global expansion of recent years has resulted in strong growth in norwegian export industries. employment has increased and unemployment has declined. the favourable labour market has boosted household optimism and supported private consumption. strong demand growth and solid profitability have also paved the way for growth in business fixed investment in norway. so far, the weakening of the us housing market has not had pronounced spill over effects. growth in china and india is strong and the euro area is experiencing a broad - based upturn. global growth is probably less dependent on demand for goods and services in the us than was the case earlier. the global expansion has also resulted in high prices for many norwegian export goods. the increase in oil prices over the past 4 - 5 years has been very important. high oil prices over a longer period have boosted oil investments and there are prospects that the high investment level will be sustained in the coming years. oil prices peaked around usd 75 per barrel in summer 2006. later in autumn, prices fell. current futures prices indicate that market participants believe prices will remain above usd 60 per barrel in the coming years. a fall in prices in a number of commodity markets at the beginning of 2007 raised the question of whether the pronounced price rise of recent years was being reversed. the experience of previous commodity price cycles indicates that rising prices gradually lead to increased supply and reduced demand. this in turn leads to a fall in prices. following a