In 2005 the euro area saw real GDP rise by 1.4%, compared with 1.8% in 2004 and 0.7% in 2003. The pace of economic activity was moderate in the first half of the year, but tended to accelerate during the second half, benefiting from the continued strong growth in global demand, robust growth in corporate earnings and very favourable financing conditions. Economic activity therefore proved to be relatively resilient against a background of high and volatile oil prices.
However, owing to large increases in commodity and energy prices and, to a lesser extent, rises in administered prices and indirect taxes, annual HICP inflation in 2005 was 2.2% – slightly higher than the rate of 2.1% observed in the two preceding years. Nonetheless, domestic inflationary pressures remained under control as continued moderate wage developments and favourable trends in prices of imported manufactured goods offset to some extent the increase in commodity and energy prices. [...]
