Exports and industrial production, which have so far provided major stimulus to economic growth, have slackened over recent months as announced by leading indicators. Whether the tentative upturn of foreign orders in manufacturing – echoing similar developments in Germany – is an early sign of a turnaround, remains to be seen. The decline in employment gained momentum in fall, while consumer price inflation abated. For the first time in 1995, the indicators of both exports and industrial output fell below the year-earlier level in September. While also mirroring a calendar effect, it clearly marks the expected slowdown in business activity. External demand has slackened particularly in western Europe, and with the usual time lag the exchange rate shifts of last spring are restraining export growth. Leading indicators have for some time presaged these developments. Industrial orders have been on a falling trend since the early months of 1995, shortly afterwards business confidence started weakening. A turnaround is not visible for the moment: the latest WIFO business survey of end-October showed again less favorable results than three months earlier. However, the inflow of orders in manufacturing industry – both domestic and from abroad – has recently suggested some improvement. A similar upturn, if only tentative, can be observed for the same indicator in Germany. For some time now, western European economies have been lacking stimulus mainly from private household demand, in the hard-currency countries also from exports. Fiscal policy has moved to a restrictive stance in nearly all countries, in order to reduce excessive budget deficits. Against this backdrop, business investment proves surprisingly robust. Modernization, the conquest of new markets and the need to boost profitability provide major incentives for higher capital spending, the earnings situation and low interest rates offer favorable framework conditions. In Austria, too, private domestic demand has lost momentum in 1995. While households partly offset the smaller disposable income gains by higher saving, an increasing part of expenditure is leaking into imports via travel or goods purchases. The Austrian tourism industry suffered losses of similar magnitude in August and September as in the early part of the summer season, partly caused by adverse weather conditions. Nevertheless, the trend towards higher deficit in the current external account has abated since mid-year. As far as can be judged from the scarce evidence, private investment, like in other countries, is more buoyant than the weak business climate would suggest. However, the boom in the construction industry of the last seven years has now come to an end. Capacities in civil engineering, in particular, are likely to be underutilized for a longer period, due to cuts in public infrastructure spending. The labor market deteriorated markedly in fall. In November, employment fell by 17.000 persons or 0.6 percent year-on-year. In spite of the continuing decline in labor supply due to a "wave" of early retirement, unemployment increased by 13.000 over the level a year ago. Consumer price inflation has further abated. For the first time in nearly seven years, the rate of inflation fell below the 2 percent mark in October. This positive trend is mainly due, apart from seasonal factors, to lower food prices as a consequence of EU membership.
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