For 1998, WIFO estimates a cash-flow to sales ratio of 8.9 percent, approximately the same level as in 1997. Surveys performed by the Confederation of Austrian Industry (Vereinigung der Österreichischen Industrie) among manufacturing firms confirm this estimate and likewise suggest no further improvement of profits. During the first half of 1998, Austrian manufacturing performed well and achieved an above-average export performance, whereas in the second half of the year, especially in the last quarter, demand growth was dampened. The main reason for this reduction in industry growth lies in reduced world demand and, consequently, declining growth in export demand as a result of the crisis in East Asia, Latin America and Russia and the associated turbulent reactions of the financial markets. According to the WIFO business survey, firms revised their expectations of future prices and production downwards in the second half of 1998. The volume of incoming orders and the business climate in general have also been assessed more pessimistically. The same holds true for most of the European countries. On the cost side, the enhanced competitiveness is an important factor of profitability which prevented earnings from falling as a reaction to declining demand growth. In relation to Austria's trading partners, unit labour costs decreased further in 1998 and prices of raw materials fell significantly. The gain in competitiveness is mainly driven by above-average productivity increases rather than reduced producer prices. This has to be seen as a consequence of the ongoing structural change in Austrian manufacturing and it suggests that firms are more and more able to improve the quality and sophistication of their products. With international comparative data only available until 1996, Austrian manufacturing maintained its past position near the European average despite a certain weakening of its cash-flow ratio. The situation is similar with regard to the equity ratio, where Austrian manufacturing – lagging far behind until the end of the 1980s – continues to catch up relative to the European average. However, as Austria is approaching the European level, the process is slowing down. European front runners in terms of cash-flow ratio are the Netherlands with more than 16 percent (1996) and Sweden with 14 percent (1995). Belgium and Denmark also report a somewhat higher ratio than Austria. However, Austrian manufacturing still outperforms Italy and Spain as well as Germany and France, where the cash-flow ratios are below 8 percent. In a global comparison within the "triad", the cash-flow ratio in 1996 was highest in the USA (12 percent), followed by an average of seven comparable European countries (9 percent), and Japan (8 percent) ranking last.