The Austrian economy is suffering from persistently weak overall demand. Thus, GDP will expand by only 0.7 percent this year; a tentative projection for 2004 suggests a growth rate of 1.2 percent. Merchandise export growth is currently losing momentum, because of sluggish activity in key trading partner countries and the (mostly indirect) effects of the depreciation of the dollar vis-à-vis the euro. For 2004, the international economic environment does not look significantly more favourable for a cyclical upturn to take hold. Low capacity utilisation and subdued sales expectations weigh on corporate investment plans. The investment-to-GDP ratio has fallen markedly since 2000, and manufacturing output may still not pick up this year. Private consumption is rising but slowly, as disposable incomes post only modest gains and the saving ratio is seen heading up. Only the construction sector shows clear signs of recovery after several years of adverse development. The extended period of slow growth, accompanied by a strong increase in labour supply, is leading to a further rise in unemployment. In 2004, the jobless rate will rise to 7.1 percent of the dependent labour force or 4.4 percent according to Eurostat definitions. Negative cyclical effects will also show up in government households, with the general government deficit edging up to 1.2 percent of GDP. The strong euro exchange rate is dampening inflation; the projected headline inflation of 1.3 percent confirms that a high degree of price stability will be maintained.