The growth of Austria’s industrial sector is again accelerating as the year draws to a close. “The UniCredit Bank Austria Purchasing Managers’ Index climbed to 61.9 in November, equalling the all-time high seen in January 2011. This reflects the strongest growth of the industrial sector since measurements first began almost 20 years ago” says Stefan Bruckbauer, Chief Economist of UniCredit Bank Austria. The current upturn of industry is now the longest since the indicator was launched, with the index exceeding the growth threshold of 50 for 32 months in succession. “The economic upswing of Austria’s industry is discernible on a broad front. In November, a large volume of new business led to a substantial rise in output, requiring companies to hire additional personnel. Price and inventory trends also reflected the renewed improvement in demand for Austrian companies” says Bruckbauer, explaining the key results of the monthly survey among Austrian purchasing managers.
Foreign demand provides impetus
November has seen a significant increase in new business. “Robust growth in orders from domestic activity is currently again accompanied by a marked acceleration in demand for exports. Austrian companies have substantially raised production levels in response to the robust growth of the European economy and demand from growth markets in Central and Eastern Europe” says Walter Pudschedl, economist at UniCredit Bank Austria. The increase in production capacity was evidently not sufficient to meet the strong rise in demand. The order backlog grew significantly in November.
Sharp decline in inventory stock
The tangible rise in demand is clearly reflected in the larger order backlogs, as well as in current inventory trends. Inventory levels of primary materials grew only slightly despite the strongest increase in purchase volume in seven and a half years. This compares with a renewed slight decline in stocks of finished goods, which have been falling continuously for three years. November even saw the strongest decline in inventory levels in over half a year.
Unabated strong rise in input prices
The prices of many commodities continue to rise in response to the favourable demand trend in industry worldwide. November saw a renewed rise in average input prices for Austrian industrial companies, although the increase was less pronounced than in the previous month. However, as in the year as a whole, demand was strong enough to enable companies to raise output prices. In November, prices even rose at the highest rate since early 2011. “Given the buoyant demand, Austrian industrial companies have been able to better factor in the renewed significant rise in primary materials in their output prices compared with previous months. The cost/income situation therefore eased somewhat in November” says Pudschedl.
Industry is driving employment
The sharp increase in orders can only be met by further increasing production capacity. Austria’s industry is therefore again employing personnel at a significantly faster rate compared with the previous month. Only once since surveys were launched in autumn 1998, in February 2011, have Austrian companies increased their workforce more strongly than in this November. An average 600,000 persons are likely to have been employed in Austria’s industrial sector in 2017, a 3% rise over the previous year. About 18,000 additional jobs were created in industry within one year. On this basis, industry has become a key factor for the continuous improvement of Austria’s labour market. “Unemployment in the industrial sector will fall to an average 4.5% in 2017, well below the 8.6% that is expected for the Austrian economy as a whole“ says Pudschedl.
The upturn will continue
The current UniCredit Bank Austria Purchasing Managers’ Index suggests that the economic upturn, underway for almost three years, will continue in the new year with a strong momentum. Order books are filled to the brim. The ratio of new orders to inventory has improved markedly over the previous month and has now reached a level where demand, taking into account existing inventory capacity, will in the coming months probably result in further strong output growth compared with the respective previous month. Moreover, the European environment is more robust than in preceding months. The preliminary Purchasing Managers’ Index for the euro area has peaked at 60, one of its highest readings ever, supported by the improvement in industrial growth in the euro area’s core countries such as Germany and France, and in its peripheral countries.
In a currently very favourable economic environment, output expectations in Austria’s industrial sector continue to point upwards. “With a high reading of 68.8 in November, the future output index determined by the survey points to a discernible expansion of industrial activity over the next twelve months. Following output growth of about 4.5% in Austrian industry in 2017, the upturn will continue in 2018 and after a dynamic start to the year we will see industrial growth of up to 4%” Bruckbauer concludes.
Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, tel. +43 (0) 5 05 05-41957;