Following the excellent start to 2017, Austrian industry is continuing on its strong growth path. “The Bank Austria Purchasing Managers' Index reached 57.2 points in February. The Index has therefore almost re-attained the 6-year high recorded in the previous month. Even though the speed of growth has decreased slightly compared with January, industrial activity is very high”, said Bank Austria Chief Economist Stefan Bruckbauer. Since spring 2015, Austrian industry has been experiencing a continuous upward trend which only developed very moderately for a long period of time. At the start of this winter, however, the pace of growth picked up considerably and turned the recovery into a stable upturn. “Although the speed of production expansion has declined very slightly due to a somewhat slower rise in new business, the current stock trends and longer suppliers' delivery times are a clear indication of the excellent business situation. Job creation is also accelerating”, said Bruckbauer commenting on some detailed results of the monthly survey of Purchasing Managers in Austrian industrial companies.
The main reason for the still strong upward trend in the Bank Austria Purchasing Managers' Index in February is the continuing favourable increase in new business. Especially in the intermediate goods sector, the order books were rapidly filled while demand in the capital and consumer goods industry also grew considerably. In addition to continuing strong domestic demand which was the sole driving force up until autumn 2016, demand from abroad has also increased substantially in the last few months.
Domestic industrial companies are currently registering more new business, especially from Europe, Asia, and the USA. Domestic demand and exports are almost equal at present in terms of the increase in orders. “Due to the continuing high demand both in Austria and abroad, Austrian industrial enterprises again expanded their output to a very large extent in February. At 59.1 points the Output Index was only slightly below the figure in the previous month in which a 70-month high was attained”, said Bank Austria Economist Walter Pudschedl.
The positive economic development is creating jobs in industry. In 2016 the number of persons employed in the goods manufacturing sector in Austria increased again for the first time in three years. Although the rise was very moderate (average of 0.4%), the growth in employment speeded up over the course of the year. “As a result of the even higher upswing in the last few months, job creation in domestic industry not only continued in February, but actually increased significantly compared with the previous month. The latest Employment Index (55.7 points) is now actually at its highest level since June 2011”, said Pudschedl.
The upturn in Austrian industry is also strongly reflected in stockkeeping trends. Stocks of finished goods dropped in February on account of high demand. In anticipation of a continuation in the positive growth in demand, Austrian industrial firms increased the quantity of purchases more than at any time in the last six years and therefore rapidly filled the stocks of primary materials and raw materials.
The pronounced rise in the quantity of purchases and, consequently, the stock of purchases is also due to companies expecting price increases. In the last six months, prices for raw and primary materials have gone up continuously. In February the increase in prices also remained at almost the same high level as in the previous month. Due to strong customer demand, higher output prices were also enforced for the fourth month in succession. “As a result of tough competition, however, the average rise in output prices was lower than the price rise for primary and raw materials. The cost situation in Austrian companies therefore worsened in February for the tenth month in succession”, calculated Pudschedl.
The latest Bank Austria Purchasing Managers' Index clearly shows that the strong industrial upturn continued in February. The speed of growth in domestic manufacturing industry is still high while the existing dynamic order trend makes it necessary to expand production even more in the next few months on account of the current stocks - albeit at a lower rate than at the start of the year.
“The prospects for Austrian industry are still very favourable, especially since the international situation has improved. The provisional Purchasing Managers' Index for the euro zone has risen to the current level of 55.5 points mainly due to the German indicator which now stands at 57 points. In the next few months this holds out the promise of direct advantages for export-oriented Austrian industrial enterprises that, as suppliers, focus very closely on the German market.
The positive mood in Austrian industrial enterprises is also continuing. Boosted by good economic forecasts for Austria and Germany, the annual outlook of Purchasing Managers in February remained very optimistic. The Index for Future Output is nearly at an all-time high at 67.8 points and only slightly below the almost euphoric figure in the previous month. “As things stand at present, industrial production in 2017 could again top 3 percent for the first time since 2011”, concluded Bruckbauer.
Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 5 05 05-41957;