Austrian industry continues to soar. “The UniCredit Bank Austria Purchasing Managers’ Index rose to 61.1 points in August, its highest in 6.5 years. The index for domestic industry has exceeded the neutral 50-point mark for almost two and a half years, which indicates growth”, states UniCredit Bank Austria’s chief economist Stefan Bruckbauer. The current industry upturn has already persisted for longer than average. Since the surveys began almost 20 years ago, there has only been one longer period of growth in domestic industry, between autumn 2005 and spring 2008, directly before the start of the financial crisis. “Industrial activity continues to look very strong at the end of summer. Domestic companies significantly increased production in August compared to the previous month owing to the improved order situation, and have taken on more employees. Rising prices, capacity bottlenecks on the part of the suppliers, and a drastic increase in delivery times have come hand in hand with the long-standing economic recovery”, says Bruckbauer.
More tailwinds from abroad
The UniCredit Bank Austria Purchasing Managers’ Index improved for most sectors in August. All subcomponents increased; only the growth in incoming orders did not increase compared to the previous month. “The demand for Austrian industrial products was very strong in August despite new business slightly slowing down. The index for incoming orders reached 59.8 points. That is the fourth highest value in the current economic upswing, supported by the increase in new orders from abroad”, states UniCredit Bank Austria economist Walter Pudschedl.
With high domestic and export demand, domestic industrial companies have expanded production further. Led by the capital goods sector, the consumption and intermediate goods sectors also reported a strong increase in production this month. “The growth of production in the domestic industry has accelerated further, but it is increasingly restricted by the suppliers’ capacity bottlenecks. The average delivery times for purchases were longer in August than they have ever been in the 20-year history of the surveys. Consequently, the backlog of orders in the industry increased faster than it has done in 6.5 years”, said Pudschedl.
Prices continue to soar
High production demands, which led to a drastic increase in order quantities in industrial companies, and the suppliers’ increasing supply difficulties drove purchase prices up in August. A number of raw and primary materials, such as steel and many other metals, chemicals, plastics, and paper and wood products were considerably more expensive. “The steep increase in the cost of primary materials translated into increased sales prices for the tenth month in a row in August. Owing to the strong demand, price enforcement in domestic industry companies has improved and the earnings performance could largely be kept stable despite increased costs”, states Pudschedl.
Impetus for the job market
The acceleration in industrial activity also ensured tailwind in the job market. After industry employment increased by almost 3%, or 16,000 jobs, in the first seven months of the year, the current purchasing managers’ survey indicates further acceleration in the creation of jobs in Austria. The employee index reached 60.6 points in August, the second-highest value since the surveys began in 1998. The increase in jobs, which began almost two years ago, is now stronger than it has been for 6.5 years. The drive in new jobs in the domestic industry is now at full momentum.
More good prospects for growth
Austrian purchasing managers are optimistic about the coming months. Only 4% of the respondents expect business losses over the course of the year. Currently standing at 68.1 points, the index for production expectations that is determined within the scope of the survey suggests a significant increase in industrial production for the coming twelve months. “The current UniCredit Bank Austria Purchasing Managers’ Index indicates that the energetic economic activity in Austria is being sustained. We expect industry growth of at least 3.5% in 2017 and therefore a marked acceleration compared to the 2% growth in 2016. Although domestic demand has already passed its peak, the high export demand will ensure a continued upward trend”, Bruckbauer is convinced. The domestic export-oriented industry is further supported by the steady upturn in Europe indicated by the rise in the purchasing managers' index for the euro area owing to the upward trend in core countries such as Germany and France.
Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 5 05 05 41957;