In 1994 Austria's economy recovered from stagnation and returned to the medium-term growth path. Having passed through the cyclical trough in the course of 1993, the economy expanded very rapidly during the first half of 1994; this high level was then sustained during the second half of the year. Preliminary estimates show that real gross domestic product (GDP) rose by 2.7 percent on average in 1994. According to this growth estimate Austria has regained its traditional edge over other Western European countries, to the extent of ½ percentage point. As is common in a cyclical recovery, merchandise exports were the engine of growth. Aggregate demand picked up markedly in Austria's most important foreign markets in Western Europe; sales to overseas countries, North America and the Far East in particular, which had helped to stabilize exports during the recession of 1993, continued to rise. In the Eastern countries the transformation process progressed, and Austrian exporters were able to maintain their leading position in these countries. Investment activity was the most buoyant component of domestic demand. After significant cuts in the previous years, enterprises spent markedly more for machinery and equipment (+8 percent in real terms). Private consumption also helped to stimulate economic activity. After stagnating for two years, private disposable income rose by 3¼ percent in real terms in 1994. A substantial part of the additional income was spent, however, abroad on vacation and travel. The decrease in prices in major destinations as a result of exchange rate realignments, and the decline in international air fares were the main factors boosting travel abroad. This, together with the decrease in the number of foreign tourists visiting Austria, reduced the surplus in the tourism account by more than one fourth to Sch 43.7 billion. The deficit in the current account rose from about Sch 8 billion to some Sch 22 billion, or 1 percent of GDP. The labor market reacted relatively promptly to the revival of economic activity. The rate of unemployment dropped to 6½ percent of dependent employment; according to OECD definitions the rate of unemployment was no more than 4½ percent. Inflation leveled off only very gradually. The inflation rate dropped from 3.6 percent in 1993 to 3.0 percent in 1994. Thus, Austria no longer belonged to the group of countries with the highest degree of price stability.