The Austrian economy is expected to grow by 1.7 percent in volume this year, driven mainly by higher exports. Austrian manufacturing, due to its close supply ties, is benefiting from the swift recovery in the German export-oriented sector. Investment is tentatively heading up, with spending on machinery and equipment boosted by rising sales expectations of firms and construction activity driven by buoyant investment in road and railroad infrastructure. Private household consumption remains subdued, because of sluggish income growth, although cuts in direct taxes next year should provide some forward momentum. The substantial increase in raw material prices, notably for crude oil, is pushing up inflation by some ¼ percentage point to an annual rate of 1.9 percent this year. Employment is set to gain 0.6 percent this year, assuming the usual reaction pattern to stronger activity. The sizeable inflow of foreign workers will nevertheless keep unemployment at its present level.