Since the end of 2000, activity has turned around sharply and the economy was technically in recession in the first two quarters of 2001. After seven years of strong growth that culminated in a rise of gross domestic product (GDP) of 5.7 per cent in 2000, year-on-year expansion is estimated to have come down to a meagre ½ per cent in 2001, with the monthly figures showing output lower than a year earlier since June 2001 (Figure 1). In the manufacturing sector, the rupture was extremely steep. In the final quarter of 2000, manufacturing production peaked at a level 14 per cent higher than a year earlier, but in the third quarter of 2001 production had fallen back by 6 per cent from that peak. The factors behind this sharp turnaround are largely external. The economic slowdown in the United States and Europe led to a sharp contraction in exports of the paper industry. It weighed heavily too on exports of the electronic equipment industry, which also suffered from demand saturation and disappointing purchases of new products. Feedthrough effects of falling exports on private consumption were small, however, as the initial impact on employment was limited and plummeting industrial output mainly showed up in lower productivity. Hence, despite the output collapse, unemployment edged down at the same moderate pace in the first half of 2001 as in the previous year. However, it remained high in an international and historical perspective (Figure 2) and the deterioration in economic conditions led to a rise in unemployment and a fall in vacancies in the third quarter. As a consequence, labour shortages are no longer a bottleneck for production.