ANNUAL REPORT 2008 - Polymer Bank Notes of the World

apidly to 1.7% in December, mainly on accountof energy and food price developments. Theannual rate of change in energy producer pricesreached a peak of 24.9% in July 2008, but hadfallen back to 1.6% by December.Excluding construction and energy, the annualgrowth rate of industrial producer prices reachedits 2008 peak of 4.4% in July, before decliningto 1.6% in December. This marked moveaffected intermediate and consumer goods,although to varying degrees and at differenttimes, but had less of an impact on capital goods(see Chart 25).Intermediate goods price inflation acceleratedduring the first eight months of the year, peakingat 6.0% in August. In the first half of the year,intermediate goods prices were still affectedby upward pressure from increasingly higherindustrial raw materials and energy prices.During the second half of the year, the latter’sdecline in world markets and the slowdown inactivity dampened output price developmentsin many parts of the intermediate goods sector.By the end of the year, many output prices werefalling in the context of a sharp contraction inactivity.Movements in the annual growth rate of capitalgoods prices were delayed and more subdued,with a slight acceleration to 2.2% in September(reversing the downward trend observed in2007) which levelled off towards the end of theyear as competition intensified in the context ofa rapid fall in demand.Further down the production chain, the sharpacceleration in consumer goods prices observedin the last few months of 2007 continued in thefirst half of 2008. The annual rate of change inoverall consumer goods prices rose to 4.7% inMarch 2008, the highest rate since the beginningof Monetary Union in 1999, mainly driven bynon-durable consumer goods prices, whichreflected global food price pressures. Excludingtobacco and food prices, the annual rate ofchange in consumer goods prices remained flatthroughout the year.Chart 25 Breakdown of industrial producerprices(annual percentage changes; monthly data)2824201612840-4energy (left-hand scale)industry excluding construction (right-hand scale)intermediate goods (right-hand scale)capital goods (right-hand scale)consumer goods (right-hand scale)2003 2004 2005 2006 2007Source: Eurostat.Note: Data refer to the euro area including Slovakia.2008Overall, by the end of the year, the generalweakening in euro area demand had resultedin considerably more competitive marketconditions at various stages of production. Thismore competitive environment, combined withfalling world commodity prices, was reflectedin widespread reports of price falls (or pricestabilisation), in input as well as output prices,for both manufacturing and services.LABOUR COSTS ACCELERATED MARKEDLYAvailable labour cost indicators for the euro areasuggest a substantial acceleration around the endof 2007 and the beginning of 2008, followingyears of wage moderation. The average annualgrowth rate of compensation per employee inthe first three quarters of the year was 3.3%,notably higher than the average annual growthrates recorded in the period 2005-07, whichranged from 1.8% to 2.5% (see Table 2).Hourly compensation provides a similar picture,although the first quarter was affected by theearly timing of Easter in 2008, thus resulting ina spike in the series in that quarter. Negotiatedwages also accelerated in the course of 2008from the band of between 2.1% and 2.3% within14121086420-2ECBAnnual Report200859