The slowdown in the world economy has begun to affect the Austrian economy. According to the latest business survey conducted by the WIFO in August the business outlook is again worse than in previous surveys. The level of inventories is now judged too high and the number of firms indicating spare capacity is on the increase. Overall, the business climate corresponds to that of the year 1988; the optimism of the last two years has vanished. This gloomy outlook is confirmed by the data on manufacturing. Output and new orders were slightly lower than in the first quarter of 1991; the leading indicators are also pointing downward. In the present phase of the cycle, only the construction sector and tourism posted high gains. In April and May, the value of construction exceeded last year's level by some 15 percent, but even in this sector the business climate has deteriorated. The summer season in the tourism sector was quite favorable, as many Austrians spent their vacations in Austrian resorts, but the number of overnight stays was well below the previous record. The results in the labour market are mixed. With the labour supply still on the increase, dependent employment continued to expand. At the same time, the number of unemployed rose, though at a reduced rate. Productivity stagnated in the first half of the year. Compensation per employee advanced by about 3½ percent in real terms. Inflation remained relatively stable in recent months, thanks to low import prices. It was only due to the high prices of agricultural seasonal products that inflation exceeded the mark of 3.5 percent in June and August.