Cash flow of Austrian manufacturing industry may have increased by 10 percent (on an annual basis) in 1995. The cash flow/turnover ratio is estimated at 10.5 percent, slightly below the year-earlier level of 10.8 percent. The pace of cash flow expansion decelerated markedly in the second half of the year, in line with general economic activity. In the first six months, industrial output rose by more than 8 percent year-on-year. Companies benefited from the abolition of the last remaining barriers to EU market as well as from the strong rebound of activity in the transition economies in Eastern Europe. Due to close supply linkages key sectors of Austrian manufacturing were pulled by German exports which held up well to the rise in the effective DM exchange rate. The average equity capital endowment of Austrian industrial companies has stabilized since 1992 at a ratio of slightly above 30 percent. Hence, the risk of bankruptcy is markedly lower in manufacturing industry than in other sectors. Relatively favorable cash flow developments in 1995 ensure continued strength of firms' capital base. The basic goods industries managed to raise strongly their profitability, with the cash flow/turnover ratio attaining 12 percent (1994 10.2 percent). Rationalization efforts and personnel cuts contributed towards a lowering of production costs on a large scale, while sales prices developed favorably. Optimistic earnings expectations in the chemical industry in 1995 were based on the development of labor costs which actually fell below the previous year's level. Sales prices for chemicals also weakened, on average, due to heightened competition in the market. The cash flow/turnover ratio in the chemical industry stayed at around 10 percent (1994 10.4 percent), broadly in line with results suggested by business indicators for the sector. Suppliers of the construction industry, together with manufacturers of consumer goods, suffered the strongest setback. Although prices for building materials rose slightly, a positive impact on earnings was offset by adverse trends in labor costs. The cash flow/turnover ratio may therefore have fallen from 14.5 percent to around 14 percent. Business developments in the technical manufactures sector were better than on the industrial average. Lively investment, both in Austria and abroad, provided major stimulus. Due to their long-standing export experience, firms were able to make full use of Austria's access to the single European market. Close supply linkages with the German investment goods industry also contributed positively. A favorable trend in labor costs made for an improvement in profitability, with their crucial cost component falling by around 3½ percent, year-on-year. For 1995, WIFO expects an increase in the cash flow/turnover ratio of the technical manufactures sector from 9.9 percent to 10.5 percent. Producers of traditional consumer goods were negatively affected by EU membership. Deficiencies in international competitiveness and the weakening of the business cycle led to a stronger setback than expected. According to the indicators available, the cash flow/turnover ratio may have fallen from 11.3 percent in 1994 to 9.5 percent in 1995.