, also retains significant influence on inflation outcomes. third, domestic slack has not been the only disinflationary factor. to understand the drivers of low inflation, we thus need to look further afield – for instance, at shocks that have driven a wedge between the underlying relationship between inflation and economic slack in recent years. cost and mark - up shocks cost and mark - up shocks are forces that may have reinforced the disinflationary pressures exerted by economic slack during the crisis, while offsetting the inflationary pressures generated by the gradual reabsorption of slack thereafter. in the phillips curve framework, such shocks would materialise as downward shifts of the curve that counteract upward movements along the curve on account of the compression of slack. one such force is a shock to the cost structure of firms, deriving, for instance, from fluctuations in import prices. the fall in oil prices to historically low levels between 2014 and 2015 is a prominent example of this type of shock as it directly reduces firms ’ production costs, as confirmed by ecb staff analysis. 5 according to the same analysis, the drag of global factors on inflation has, indeed, more than compensated for the improvements in domestic drivers. changes in firms ’ ability to charge mark - ups over their own production costs can further blur the observed relationship between inflation and economic slack. technological advancements, while also reducing distribution costs, can limit firms ’ pricing power by facilitating price discovery by customers. for example, the advent of online retail platforms has greatly increased price transparency among consumers as the share of people searching for information online has risen continuously in the euro area. the downward pressure on mark - ups and, hence, prices associated with the spread of e - commerce is consistent with an erosion of euro area firms ’ profit margins, which did not return to their pre - crisis levels until late 2014. empirical analysis does not, however, find robust evidence that mark - up shocks have been a particularly dominant determinant of disinflationary tendencies since the crisis. in any case, these forces are only temporary : they can move inflation away from its long - run trend, even for a protracted period of time, but cannot affect trend inflation itself, unless they infiltrate inflation expectations. it is through inflation expectations that shocks to the inflation formation process which would otherwise have no relevance for a central bank can become a monetary policy problem. this brings me to the third element in the phillips curve – its intercept – which is determined by inflation

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