, in contrast to the usual pattern, the household sector was a major stabilizing force. as a consequence, although household spending should continue to trend up, the potential for significant acceleration in activity in this sector is more limited. in fact, there are a number of pluses and minuses in the outlook for household spending. low mortgage interest rates and favorable weather have provided considerable support to homebuilding in recent months. moreover, attractive mortgage rates have bolstered both the sales of existing homes and the realized capital gains that those sales engender. they have also spurred refinancing of existing homes and the associated liquification of increases in house values. these gains have been important to the ongoing extraction of home equity for consumption and home modernization. the pace of such extractions likely dropped in response to the decline in refinancing activity that followed the backup in mortgage rates that began in early november. but mortgage rates remain at low levels and should continue to provide support to activity in this sector. consumer spending received a considerable lift from the sales of new motor vehicles, which were remarkably strong in october and november owing to major financing incentives. sales have receded some as incentives were scaled back, but they have remained surprisingly resilient. other consumer spending appears to have advanced at a moderate pace in recent months. the substantial declines in the prices of natural gas, fuel oil, and gasoline have clearly provided some support to real disposable income and spending. to have a more persistent effect on the ongoing growth of total personal consumption expenditures, energy prices would need to continue declining. futures prices do not suggest that such a decline is in the immediate offing, but the forecast record of these markets is less than sterling. although the quantitative magnitude and the precise timing of the wealth effect remain uncertain, the steep decline in stock prices since march 2000 has, no doubt, curbed the growth of household spending. although stock prices recently have retraced a portion of their earlier losses, the restraining effects from the net decline in equity values presumably have not, as yet, fully played out. future wealth effects will depend importantly on whether corporate earnings improve to the extent currently embedded in share prices. perhaps most central to the outlook for consumer spending will be developments in the labor market. the pace of layoffs quickened last fall, especially after september 11, and the unemployment rate rose sharply. over the past month or so, however, initial claims for unemployment insurance have decreased markedly, on balance

operate efficiently without endangering sound fiscal positions in the longer term. moreover, governments are encouraged to push ahead with reforms relating to the size and structure of public expenditure and revenue, which will also create room for tax cuts and absorb the fiscal costs of population ageing. in the field of structural reforms allow me to refer briefly to the adoption of the broad economic policy guidelines. if implemented in a determined manner, structural reforms will contribute to expanding the euro area's potential for non - inflationary growth and to reducing its high level of unemployment. we are now at your disposal for questions.