The austerity budgets adopted in 1996 and 1997 to consolidate the public household put a brake on income development in Austria. Although private households reacted with a significant weakening of their propensity to save (i.e., a larger share of disposable income went into private consumption), thus compensating for the restrictive fiscal effect, private consumer demand grew only moderately during that two-year period. Following a cyclical recovery and the elimination of the dampening effect of fiscal policy, consumer spending by private households again picked up strongly during the first half of 1998. The savings ratio went up at the same time. The improved situation in tourism also had a favorable impact on tourism. As for the 1998 Christmas season, business is expected to be better than last year. According to first estimates, private consumer spending totaled ATS 699 billion during the first half of 1998, up by 2.8 percent from the year before. Corrected for inflation, consumption rose by 1.8 percent. A lively pace of economic activity, which was no longer counteracted by a restrictive fiscal policy, resulted in a favorable development of incomes and a relatively strong increase of consumer spending. At the same time, the savings ratio rose by about 1 percentage point. Thanks to increased consumer spending by Austrians, combined with growth in tourism, the retail sector reported satisfactory results for the first half of 1998 (+2.5 percent in real terms). Growth was strongest in consumer durables (+3.9 percent in real terms), as demand for such goods reacts readily to cyclical fluctuations. Sales increased even more sharply in the wholesale sector, mainly as a result of the favorable development of industrial production and exports. While trade prices rose only moderately during the first half of 1998, productivity increased markedly. It appears that growing competition forces businesses to streamline their operations. Hence, employment growth was negligible, except in the part-time and less-than-part-time occupations. Whereas the wholesale sector followed the downward trend of the economic cycle in July and August, retail trade continued to pick up, a fact which gives rise to considerable optimism in view of the Christmas season, which is of particular importance for some sectors of the economy, as can be seen from the high December peaks. Fourth-quarter sales in excess of the average level of sales of the first three quarters of the year may be taken as an indicator of the volume of Christmas business in a given sector. In 1997, this amount totaled approximately ATS 19 billion (excluding V.A.T.). Given the fact that this indicator would be distorted by special influences, such as those observable in recent years under the impact of fiscal measures, WIFO based its forecast of Christmas spending on a time-series analysis. This approach is based on the relevant factors influencing retail development (trend, cyclical development, season, calendar dates, fiscal measures, etc.). Thus, Christmas retail sales are expected to grow by about 2 percent in real terms in 1998 (according to WIFO definition: December sales in excess of "normal" sales).