4 1 / 2 %. broadly similar indications are emerging from the second pillar. this year, real gdp growth may be somewhat weaker than last year, and inflationary pressures stemming from previously higher oil prices and a low external value of the euro may gradually disappear. nevertheless, there is also need for some caution. the external environment of the euro area is currently surrounded by a high degree of uncertainty. after several years of impressive economic growth in the united states, the slowdown in growth there may be more significant than previously anticipated. obviously a considerably weaker economic performance of the united states, which accounts for slightly more than 20 % of world gdp, would have implications for world economic growth. however, on the basis of the information available at present, it is likely that world economic activity will remain at an acceptable level this year. in addition, it should be borne in mind that the euro area itself is also a large domestic market - it is, in fact, the second largest in the world - accounting for over 15 % of world gdp. exports of goods and services only amount to around 17 % of euro area gdp : this implies that the influence of external trade on real economic growth is limited. instead, euro area economic activity is mainly influenced by domestic factors. economic growth in the euro area has recovered considerably since the second half of 1999. real gdp growth is expected to have been around 3 1 / 2 % in 2000, compared with an average real gdp growth of 2 % in the 1990s. real gdp growth in the euro area has slowed down somewhat since the second half of 2000, as demonstrated in recently published gdp data and short - term indicators, such as industrial production and, to some extent, the european commission's industrial confidence indicator. however, at the same time, this indicator, together with the capacity utilisation rate, have remained at a high level and continue to give a relatively favourable picture. regarding private consumption, the european commission's consumer confidence indicator recovered on average in december and january, following a dip in the previous months. in particular, private households were more optimistic about the future economic situation as well as their own financial situation. the data confirm the view that the earlier decline in consumer confidence was mainly due to the adverse effects of the increase in oil prices until november 2000, which dampened private household real disposable income growth. overall, consumer confidence has continued to remain at a high level, reflecting favourable financing conditions and improving conditions in the labour markets. the latter

, imparting a medium - term orientation to the strategy as a whole. in order to fulfil its primary objective, the ecb's monetary strategy relies on two pillars. the first pillar assigns a prominent role to money. a central bank has a natural interest, but also a comparative advantage in analysing monetary developments, because money is - if i may say so - the central bank's " output ". there is broad empirical evidence of a long - term stable relationship between money and prices and good leading indicator properties of money in the euro area. the prominent role of money is signalled by the announcement of a reference value for the annual rate of growth of the broad monetary aggregate m3. this reference value represents a visible public commitment to analysing and explaining monetary developments and their implications for price stability in detail. in december 2000, the governing council of the ecb reconfirmed the reference value of 4 1 / 2 % annual growth. this rate should be consistent with price stability in the medium term. while the reference value plays an important role in monetary analysis, the assessment of the first pillar goes beyond the evaluation of the deviation of m3 growth from the reference value. it encompasses a variety of approaches which assign a central role to money because of the ultimately monetary nature of inflation, as well as a detailed analysis of the components and counterparts of m3. thus, an in - depth analysis of the overall liquidity conditions in the euro area is provided. despite broad consensus on the fact that inflation is ultimately a monetary phenomenon, the assessment of monetary developments alone does not give an accurate picture of the state of the economy and of the potential risks to price stability. therefore, for a robust strategy, it is useful to analyse additional indicators relevant for future price stability and to combine them under a second pillar. the second pillar of the ecb's strategy ensures that the interplay between supply and demand in the real economy is sufficiently taken into consideration when evaluating the risks to price stability. it comprises a variety of predominantly non - monetary factors, which are relevant for future price developments. some of the factors of the second pillar can be especially relevant in the short term, for example the development of oil prices. for monetary policy decisions, it is important to know whether, for example, shocks originate from the supply side or from the demand side of the economy, whether they exert a temporary or permanent influence on prices, or whether they result from a domestic or an external source.