UniCredit Bank Austria Purchasing Managers’ Index in June:
Downturn in Austrian industry accelerated in June

  • In June, the UniCredit Bank Austria Purchasing Manager’s Index was at only 47.5 points, placing it below the growth threshold of 50 points for the third month in a row. 
  • The sharp drop in new export orders lead to a reduction in production output 
  • Employment growth continues at a slower pace
  • Falling raw material costs improve earnings situation of domestic companies in June 
  • The international environment and the slightly higher production expectations of domestic industrial companies signal a bottoming out of the downturn in industry

After strong production growth continuing at the start the year, the downturn in the industrial economy has accelerated further, with the result that Austrian industry has now left its growth path. “While the domestic economy in Austria, supported by consumption, continues to enjoy good momentum overall, in mid-2019 domestic industry is slipping deeper into recession, mainly due to falling export demand. The UniCredit Bank Austria Purchasing Managers’ Index fell to 47.5 points in June, its lowest point in four and a half years and it is now below the growth threshold of 50 points for the third month in a row,” says UniCredit Bank Austria chief economist Stefan Bruckbauer. 

Austria’s industry falls behind European average
Austrian industry is therefore currently in somewhat worse shape than European industry. “For the first time since the end of 2015/beginning of 2016, the purchasing managers’ index for the eurozone, at 47.8 is currently higher than the Austrian index. This is primarily due to the negative impact on domestic suppliers of the weak state of industry in Austria’s most important trading partner, Germany, which is reflected in their very low index of only 45.4 points,” says Bruckbauer. 

First signs of bottoming out in Austrian industry 
In contrast to developments in Austria, the industrial economy improved slightly at the European level in June. Purchasing managers’ indices rose both in Germany and, above all, in France. In France, the rise to 52.0 points even sends out a noticeable growth signal. “The improved international environment, the stabilised ratio of new orders to inventory and the slight increase in production outlooks from domestic companies could be signs that the industrial downturn in Austria will not accelerate any further in the coming months. Domestic industry could be on the verge of bottoming out,” says Bruckbauer and adds: “However, this is heavily dependent on what happens next in the trade conflict with the USA.” Domestic companies are again forecasting the medium-term outlook in June as being somewhat more favourable than in the previous month. At 50.2 points, the index for production outlook in twelve months is even slightly above the growth threshold once more. 

Accelerated decline in new export orders
In the monthly survey of Austrian purchasing managers, which points to a further broad-based deterioration in the industrial economy in Austria, the unfavourable outlook on order trends by companies stands out as particularly negative. “The decline in new business accelerated in June, as demand from abroad slumped sharply. At 42 points, the index for new export orders reached its lowest level for more than six years. As a result, domestic companies have again significantly reduced production, although the pace has slowed somewhat compared to the previous month,” says UniCredit Bank Austria economist Walter Pudschedl. The significant slump in new business did not lead to an accelerated decline in production output in June, as domestic companies are still quickly clearing existing order backlogs. The sub-index for orders on hand has fallen to 44.5 points. The order backlog is currently declining more rapidly than at any time in the last six and a half years. The processing of the backlog of uncompleted orders that built up during the boom is also leading to a noticeable reduction in average delivery times in domestic industry. Furthermore, companies continue to create additional jobs. At 51.0 points, however, the employment index fell to its lowest level since spring 2016. 
In view of the weak order situation, domestic companies reduced their purchasing volumes significantly compared with the previous month, with the result that the size of their stocks of purchases fell noticeably in June. The second consecutive decline was the strongest in two and a half years. “While inventories of raw materials and semi-finished products were reduced, stocks of finished goods increased for the third consecutive month. Companies have apparently been adapting their production output too slowly to the decline in new business,” says Pudschedl. However, the increase in stocks of finished goods was only minimal, as the corresponding sub-index, which is at 50.5 points, shows. 

Declining prices for raw materials and commodities
The decline in demand was also reflected in industrial price trends in June. For the first time in three years, Austrian companies faced declining prices for raw materials. In particular, metals and chemical products were cheaper to obtain on the market. “Despite lower material costs and the sluggish order situation, domestic companies were able to push through higher output prices in June. The differing price trends in input and output prices enabled Austrian companies on average to improve their earnings situation at mid-year 2019,” said Pudschedl. 


UniCredit Bank Austria Economics & Market Analysis Austria 
Walter Pudschedl, Tel.: +43 (0)5 05 05-41957;
Email: walter.pudschedl@unicreditgroup.at