for growth is confirmed by available forecasts from international institutions, such as the imf and oecd, as well as by consensus forecasts, which project growth in the euro area in the next one to two years to be higher than in 1999, with an increase from close to 2½ % last year, to above 3 % this year and the next. it is true that recent indicators suggest that, following the period of acceleration, the economic expansion may now be levelling - off, albeit at a robust pace. growth in industrial production excluding construction has decelerated somewhat recently. the purchasing managers ’ index declined in the course of the summer, which would indicate that a turning point may have been reached in year - on - year growth of industrial production. at the same time, however, the index still points to continued strong rates of growth after the first half of this year. moreover, sustained high levels of industrial confidence, as shown by the ec survey, suggest that growth remains robust. although consumer confidence fell in september, it remained clearly above its long - term average. however, the possibility cannot be ruled out that the significant increase in oil prices observed in the past months may temporarily dampen growth dynamics over the short term. thus far in october, oil prices - measured in terms of uk brent - have remained above usd31 per barrel. if oil prices were to develop according to futures prices for the remainder of this year, the oil price increase for 2000 as a whole would amount to more than usd10, compared with the average price in 1999. the oil price increase has caused the terms of trade of the euro area to deteriorate, and has thus also had a certain negative impact on the growth of real income for the economy as a whole. however, it can be noted that the reduced oil dependence since the first oil shock in 1973 limits the overall impact of any price rise. against the background of a generally favourable economic outlook, the increase in oil prices can be seen as occurring at a point in time when euro area economic activity should not be overly sensitive to shocks of this kind. the oil price increases have influenced recent price developments and still continue to do so. the same holds true of the depreciation of the euro exchange rate. overall inflation, as measured by the harmonised index of consumer prices ( hicp ), may well remain above 2 % for a more protracted period than expected earlier. we are currently seeing the direct effects of such external developments on the

there has, for example, been a rapid growth of the euro - denominated private bond market. the euro did not cause this trend, but it has given it a major impetus. the process of monetary policy - making and its implementation has functioned efficiently. the evolution both of external inflation forecasts and of inflation expectations derived from the analysis of long - term interest rates ( in particular, index - linked bonds ) indicates that the financial markets and economists widely expect medium - term price developments that are in line with the ecb ’ s definition of price stability. obviously, bond yields and many external forecasts incorporate expectations of future policy changes and therefore offer a judgement on prospective monetary policy decisions, as well as on decisions taken in 1999 and 2000. as such, they provide a positive assessment of the overall monetary framework. actual inflation in 1999 stood at 1. 1 %, compatible with price stability. although inflation has increased this year, it is still relatively low, both historically and compared with the united states, for instance. above all, as indicated earlier, monetary union has proven to be a catalyst for major improvements in the structural economic environment. in this respect, there is thus also reason to expect that the euro area could benefit over time from the advances in the new technologies, as the united states has apparently been doing already. europe is thus changing and much has already been achieved. the advances are noteworthy, although they are not always appreciated, not even by europeans themselves. there remains a great deal to be done in order to further upgrade the structural environment. however, this in itself creates opportunities for the future as there is a large potential to be exploited. 3. outlook for euro area economy let me now turn to the conjunctural side of the economic environment. where economic growth is concerned, the euro area economy has impressively overcome the negative mood prevailing in early 1999, recovering to reach a state of affairs not seen for more than a decade. real gdp growth in the euro area has shown a strong performance since mid - 1999, with four consecutive quarters of 0. 9 % growth, quarter - on - quarter, and the forces underlying sound growth in the medium term remain in place. the external environment remains favourable. domestic demand is expected to continue to be strong as well. consumption is benefiting from high consumer confidence and further increases in employment, and investment is being stimulated by higher corporate profitability and increasing rates of capacity utilisation. domestic financing conditions are also good. this positive outlook