In the last couple of months, business surveys in the euro area point to a slowdown of the recovery in the manufacturing sector. The boom in exports has not, or only hesitantly been transmitted to domestic demand. In Austria, exports and manufacturing output were still relatively lively early this year, while retail sales in the first two months of 2005 disappointed, given the positive income effects from the tax reform. The marked upward drift of inflation is squeezing private purchasing power.