The Swedish economy has now started to recover from the relatively brief but sharp slowdown in 2001 in which growth decelerated to 1¼ per cent. The main factors behind the weakening were the slowdown of global demand in general and for telecommunication goods and services in particular, together with waning consumer confidence, prompted by the unwinding of the stock market bubble. These elements aside, macroeconomic conditions generally remained buoyant, thanks to sizeable gains in household disposable income, low interest rates, moderately increasing house prices and a weak exchange rate. Combined with the turnaround in consumer sentiment and world trade around the beginning of the year, these factors have elicited a pick-up in consumption and exports, while investment remained subdued early this year. Sweden is entering the incipient upturn in a generally healthy condition, albeit with underlying inflation well above the target rate of 2 per cent, and with robust surpluses on the government and current accounts, although private saving is relatively low.