On the Sustainability of the Current Business Cycle Upswing

Business activity in Austria has been heading up again since 2015. As from 2016, domestic one-off fiscal effects have added to the growth momentum, while in the current year external stimulus is playing a dominant role. Although, due to the usual time lag, unemployment has so far hardly started to decline, a number of cyclical indicators have meanwhile nearly reached previous highs, from where demand and output growth usually decelerates. Unlike in earlier episodes of cyclical upturn, neither fiscal nor monetary policy would inhibit the continuation or even reinforcement of the pace of growth. However, there are mounting signs of slackening business activity in the USA, which may also cloud the prospects for the euro area. However, since internal imbalances within the euro area have to some extent been corrected, the probability of "contagion" should at present be significantly lower than before the onset of the financial market crisis and the recession.