Following a short period of economic growth at around 3 per cent, the economic climate began to deteriorate in late 2000. This was primarily related to external factors – the sharp slowdown in world trade, and the negative impact of higher energy prices on household incomes. Underlying domestic economic conditions remained more conducive to growth, with the positive performance of the labour market, especially in service and construction sectors, sustaining consumer confidence and limiting the domestic demand downturn.  Indeed, prior to the 11 September terrorist attacks in the United States, order books appeared to be improving. But a sharp near-term slowdown is now foreseen, as export markets stagnate, businesses delay investment plans in response to rising world uncertainty and households raise precautionary savings. The annual growth rate of the Italian economy in 2001 could fall to 1.8 per cent from the near 3 per cent registered in the previous year.