ANNUAL REPORT 2008 - Polymer Bank Notes of the World

Table 3 Composition of real GDP growth(percentage changes, unless otherwise indicated; seasonally adjusted)Annual rates 1) Quarterly rates 2)2006 2007 2008 2007 2008 2008 2008 2008 2007 2008 2008 2008 2008Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4Real gross domestic product 3.0 2.7 0.8 2.2 2.1 1.5 0.7 -1.2 0.3 0.7 -0.2 -0.2 -1.5of which:Domestic demand 3) 2.9 2.4 . 2.1 1.7 1.1 0.8 . 0.1 0.6 -0.3 0.4 .Private consumption 2.1 1.7 . 1.3 1.3 0.4 0.1 . 0.2 0.0 -0.2 0.1 .Government consumption 1.9 2.2 . 2.0 1.4 2.0 2.2 . 0.3 0.3 0.8 0.7 .Gross fixed capital formation 5.8 4.2 . 3.2 3.7 2.6 0.9 . 1.0 1.4 -0.9 -0.6 .Changes in inventories 4) 0.0 0.0 . 0.2 -0.1 -0.2 0.1 . -0.3 0.2 -0.2 0.4 .Net exports 3) 0.2 0.3 . 0.1 0.4 0.4 -0.1 . 0.3 0.1 0.1 -0.6 .Exports 5) 8.6 6.0 . 4.0 5.3 3.9 2.0 . 0.5 1.7 -0.1 0.0 .Imports 5) 8.4 5.4 . 3.9 4.4 3.1 2.2 . -0.2 1.6 -0.5 1.4 .Real gross value addedof which:Industry excluding construction 3.9 3.6 . 3.3 2.7 1.3 -1.1 . 0.5 0.2 -0.6 -1.3 .Construction 3.0 3.2 . 1.7 2.8 1.6 0.4 . 0.9 2.6 -1.8 -1.2 .Purely market-related services 6) 3.6 3.2 . 2.7 2.6 1.9 1.2 . 0.4 0.6 0.2 0.0 .Sources: Eurostat and ECB calculations.Notes: The figures reported are seasonally and partly working day-adjusted, as not all euro area countries report quarterly national accountseries adjusted for the number of working days. Data refer to the euro area including Slovakia.1) Percentage change compared with the same period a year earlier.2) Percentage change compared with the previous quarter.3) As a contribution to real GDP growth; in percentage points.4) Including acquisitions less disposals of valuables.5) Exports and imports cover goods and services and include internal cross-border trade in the euro area. Since intra-euro area trade is notcancelled out in import and export figures used in national accounts, these data are not fully comparable with balance of payments data.6) Includes trade and repairs, hotels and restaurants, transport and communication, financial intermediation, real estate, renting andbusiness activities.From September 2008 the sudden andextraordinary intensification and broadening ofthe financial turmoil and the ensuing heighteneduncertainties led to a rapid contraction of euroarea GDP (-1.5% quarter on quarter). Firmsstarted to react forcefully to the rapid depletionof order books, postponing expansion plans andcutting inventories in the face of costlier andreduced access to financing, while householdsincreased their savings in reaction to theincreased uncertainty about short-term jobprospects and to negative wealth effects.THE SLOWDOWN IN GDP GROWTH WASBROAD-BASEDThe weakening in demand during 2008 wasbroadly based across GDP components. Externaldemand slowed as activity in advanced economiesdecelerated and emerging markets becameincreasingly affected by the financial turmoil.Domestic demand also softened considerably.Rising commodity prices strongly affectedhouseholds’ real income in the first half of theyear, while cooling housing markets led to arapid decline in residential investment. Waningcapacity pressures, renewed uncertainty andtighter financing conditions led to cuts in corporateinvestment.Faced with subdued real income growth, fallingfinancial wealth, tightening credit conditions andworsening labour market prospects, householdspending moderated considerably in the courseof the year, with private consumption growingby around 0.6% in 2008 as a whole – fully onaccount of the carry-over effect from 2007 on theyearly growth rate, as during 2008 consumptionincreased in only one quarter – compared with1.7% in 2007. Although nominal householdincome growth was reasonably robust duringmost of the year, owing to the solid growth incompensation of employees (resulting from theacceleration in compensation per employee andstill resilient employment), the real disposableincome of households came under significantdownward pressure from accelerating HICPinflation. Large increases in commodityprices raised the cost of households’ typicalECBAnnual Report200863