Austria's economy is projected to grow by 2.4 percent in volume in 2006. The cyclical recovery will be sustained by exports. The manufacturing sector will largely benefit from the front-loading of purchases of durable consumer goods, notably motor cars, in Germany ahead of the VAT increase as from 1 January 2007. Results from the regular WIFO business survey suggest that improved sales prospects will induce companies to carry out new investment projects. Private household demand, for its part, will only gradually overcome its sluggishness caused by wage moderation and a rising saving ratio. The deceleration of inflation in 2006 will leave scope for limited gains in real income. Higher public spending on active labour market policy will prevent unemployment from rising further, but will, together with other new expenditure commitments, also lead to an increase in the general government deficit.