In January, business expectations continued to improve. According to the business survey conducted by the Austrian Institute of Economic Research, production expectations in manufacturing are markedly more optimistic than in the previous quarter: more firms expect an increase rather than a decrease in production during the next few months. The level of orders and the capacity utilization rate are now seen in a more optimistic light. The rise in orders from abroad helped to stabilize the manufacturing sector. Manufacturing output in the fourth quarter exceeded the level of the fourth quarter of 1993 by 1 percent, with the recovery mainly supported by the basic goods industries. For the first time since the fall of 1992 exports recorded a year-on-year gain (+1½ percent in the fourth quarter). Losses in exports to Western Europe were more than offset by higher sales to the U. S., South East Asia, China, and Eastern Europe. The decline in imports did not level off in the fourth quarter: the year-on-year decrease of 4 percent implies a persistent weakness in domestic demand, especially for capital goods. In 1993, imports dropped by 4.8 percent, at a slightly higher rate than exports. As a result, the current account improved by more than AS 8.5 billion in 1993. The economic recovery in the U. S. accelerated in the fourth quarter with an annual growth rate of 7½ percent. In the European Union business confidence improved, but consumer sentiment, particularly in Germany, remained pessimistic. Activity in the manufacturing sector also rebounded in Germany, but the risk is great that, as a result of tax hikes, the cyclical development will take the form of a W. In Austria, consumer demand took a favorable turn at the end of 1993. Retail sales (seasonally adjusted) were flat towards the end of the year. In the construction sector, civil engineering operated close to capacity; private and public non-residential construction also recorded gains. With the incipient recovery of economic activity, the labor market also showed signs of stabilization. In February, unemployment was only slightly higher, employment barely lower than one year ago. According to the OECD definition, the unemployment rate (seasonally adjusted) was 4.6 percent. It is still unclear to what extent this result is due to special seasonal factors, but if this trend were to continue, the rate of unemployment might be lower than the figure projected for 1994. Vacancy statistics, usually a leading indicator, also mirror the stabilization in the labor market. In February 1994, the number of vacancies was just 10 percent below the level in February 1993. Inflation eased at the beginning of the year; the rate of inflation dropped from 3.5 percent to 3.1 percent in January. Price increases of industrial products, food, and private services, particularly in tourism, leveled off. A rise in the gasoline tax and in some public fees at the beginning of 1994, however, stimulated inflation. In contrast to earlier years, public fees increased more sharply than the prices of private services. The question of how much Austria's accession to the EEA has contributed to the dampening of inflation remains to be analyzed in detail. Gains in contractual wages slowed down further. With the new contracts in the public sector and private service sectors becoming effective, the yearly rate of increase dropped from 4.5 percent in December 1993 to 3.6 percent in January 1994.
Steigende Produktionserwartungen; Production Increases Expected
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