Upswing Taking a Break

Since mid-1989 the upward trend of demand and output has become flatter. The rise in exports has lost momentum; industrial output and orders declined according to seasonally adjusted data for August and September; the slower pace of activity is confirmed by the WIFO composite index of leading indicators. Looking closer at all the information available suggests that the business cycle is taking a short break rather than starting a downward trend. Growth projections for Western Europe have been revised upward in the OECD autumn forecasting round. Liberalization in Eastern Europe may further strengthen the business climate while its actual impact on activity will take time to materialize. In Austria, private consumption has recently been the strongest source of growth, fuelled by the net income bonus stemming from the tax reform, rising exployment and high consumer confidence. Investors also continue to be optimistic according to the latest business surveys. Employment is rising unabated by more than 50,000 year-on-year. As labour supply proves very elastic there is little change in unemployment and virtually no wage drift. Consumer prices are climbing at an annual rate of 2¾percent.