key insight for understanding these three effects is the different behaviour of price - setters across economic sectors. in particular, there is a large and growing body of evidence that shows that prices in the services sector are considerably “ stickier ” than in all other sectors in the economy – that is, they adjust less frequently. 17 take the micro evidence presented by the eurosystem ’ s inflation persistence network. in the euro area, 5. 6 % of prices in the services sector change each month, compared with 9. 2 % for non - energy industrial goods and 28 % for unprocessed food. 18 housing services, meanwhile, which account for a quarter of the services weight in the euro area hicp, are among the most rigid prices in the economy. apartment rents in germany, for example, remain unchanged for more than four years, on average. 19 ranking industries by 9 / 16 bis central bankers'speeches frequency of price changes produces remarkably consistent results across economies, both within and outside the euro area. 20 estimates of sectoral phillips curves corroborate these findings. for france, for example, estimates show that the frequency of price changes across sectors ranges from a single quarter to almost two years. in virtually all service industries, the frequency of price changes is towards the upper end of this range. 21 there are at least two factors that may help explain why services prices may react more sluggishly to changes in firms ’ external conditions. one is that wages account for around 40 % of input costs in services, compared with 20 % in the manufacturing sector. 22 just think of education, health, childcare, restaurants and so forth. wage rigidity implies that the costs of producing most services are relatively stable over time, resulting in less need for price adjustments. another factor relates to competition. evidence shows that markups in the services sector are higher, on average, than in the manufacturing sector, partly reflecting reduced exposure to foreign competition. 23 although the share of services in total global trade has increased somewhat since 1970, they still only account for around a fifth of total global exports today. 24 lower competition may allow services firms to adjust their prices less frequently. the implication is that the rise of the services sector has measurably lowered the median frequency of price changes in the economy and, therefore, the response of inflation to changes in demand and monetary policy in the short term, as you can see on the left - hand side of my slide. but in the medium term,

consumption, saving and investment, they should also not have impediments in the form of unnecessary and excessive regulations. a sound monetary and fiscal policy framework has to be complemented by structural policies that make the economy more flexible and dynamic. since march 2000, when the european council launched the lisbon agenda, european national governments, parliaments and social partners have become increasingly aware of the importance of implementing a substantial, courageous and far - reaching agenda of structural reforms. the ecb, from its side, fully endorses the lisbon agenda and shares its objectives. we also agree with the main conclusion of the high level group chaired by wim kok that - in preparation of the mid - term review of the lisbon strategy - has stressed the advantages of sharpening the focus on the key issues in order to revamp the structural reform process in europe. indeed, in the last decade, euro area countries have made some tangible progress with their structural reform programs. competition in product markets due to, for example, a lower level of state aid and de - regulatory measures has increased, especially in network industries. this resulted in significant downward price effects in some sectors like telecommunication. the ecb is supporting strongly governments that are courageously embarking on reforms and does not underestimate the difficulty to implement them. in particular it has proven to be more difficult than previously expected for european governments and social partners to implement labour market reforms that could strengthen the positive employment trends recorded in the eu in the second half of the 1990s. breaking the reform deadlock is of the utmost importance, also in light of growing role played by new economies in the international market place that exposes european firms to new and challenging competitive pressures. it is not my intention today to provide suggestions to government, parliaments and social partners about specific policy actions, but it is clear to me that in the area of labour market reform, increasing flexibility and suppleness with a view to maximize job creation and to augment the capacity of outsiders, like unskilled youth, to enter the job market is of the essence. in another domain there is a number of countries where the lengthening of retirement age, allowing workers to work longer hours per week and the reduction of non - wage costs of labour - like labour income taxation and social security contributions - are necessary to increase labour supply and demand, thus raising the productive capacity of the economy. recent events involving a number of important euro area companies demonstrate that social partners are aware of the collective benefits induced