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29.01.2018

UniCredit Bank Austria Purchasing Managers’ Index in January:
Austria’s industry has the strongest start to the year for twenty years

UniCredit Bank Austria Purchasing Managers’ Index in January:
Austria’s industry has the strongest start to the year for twenty years

  • UniCredit Bank Austria Purchasing Managers’ Index continues to signal a high level of industrial growth, with 61.3 points in January
  • Strong increase of production output despite slightly more moderate order growth in January
  • Employment growth continues, but at a slower pace
  • High, but declining cost dynamics in purchasing and increased prices in sales mean that, overall, Austrian companies are experiencing a slight improvement in earnings
  • Continuing optimism in Austria’s industry: An anticipated increase in production of about 4 per cent in 2018

Austrian industry was able to continue the high momentum of the previous year. The dynamic growth course will continue unabated at the beginning of 2018. “The UniCredit Bank Austria Purchasing Managers’ Index reached 61.3 points in January. Although the indicator is slightly behind the all-time high of the previous month, it nevertheless shows that industry in Austria is continuing to perform very strongly. In fact, Austrian companies have never had such a dynamic start to a new year as in 2018,” says Stefan Bruckbauer, Chief Economist of UniCredit Bank Austria.

Austria’s industry continues to perform very well by European standards
Not all of the indicator’s components currently reach the exceptionally high level of the previous month, which was for the most part at an all-time high. However, the detailed figures of the Austrian purchasing managers’ index continue to exceed the respective benchmark figures for the eurozone. The preliminary purchasing managers’ index for the eurozone also fell slightly in January and, despite a very high 59.6 points, is slightly below the Austrian value. Even when compared directly with the major European core countries, Austrian industry is in the lead. At the beginning of the year, the purchasing managers’ index for the manufacturing industry fell to 61.2 points in Germany and 58.1 in France, but the indices are therefore also well above the growth limit of 50 points.

“The expansion rate of domestic industry has generally declined somewhat in January. Thanks to a barely diminished domestic and foreign demand, production in January was further expanded, which in turn resulted in the creation of many new jobs. In view of the strong demand, companies have increased their purchasing volume at a record rate, which has, however, resulted in extended delivery times and sharp price increases,” says Bruckbauer, explaining the most important detailed results of the monthly survey of Austrian purchasing managers.

Increased domestic and foreign orders
Backed by the buoyant European economy, demand for Austrian export products increased further in January. The number of domestic orders also rose again sharply. In both cases, although the increase in new business was slightly lower than in the previous month, it was well above the long-term average growth rate. “In January, domestic companies reacted to the full order books with a slightly lower, but again very strong, expansion of production output compared to the previous month. Although the companies increased their workforce significantly, order backlogs rose in January with one of the strongest rates ever recorded in the survey,” said Walter Pudschedl, Economist at UniCredit Bank Austria. For two years now, the expansion of existing capacities has been lagging behind the strong order growth, which means that demand from domestic companies cannot be fully met.

Supply chains under pressure
Due to the buoyant industrial economy and further increasing demand, the supply chains came under even greater pressure at the beginning of 2018. Austrian companies increased the purchase volume in January with a new record rate. As a result, delivery times again extended considerably. The performance of the providers has steadily deteriorated since mid-2013. The price trends also reflect the tension in the supply chains. The prices that Austrian companies had to pay for primary materials rose at a barely slower pace than in December, which had marked an 80-month high in this regard.

Raw materials were the main reason for the strong price increase. The higher expenses for crude oil and metals particularly impacted the domestic capital goods industry. “In view of the strong demand, Austrian companies were able to transfer the above-average increase in costs, over a long-term comparison in January, to customers via significantly higher selling prices. Overall, the cost and earnings situation of the domestic industry has therefore tended to relax slightly compared to the previous months,” says Pudschedl.

Industrial growth of 4 per cent for 2018 in sight
At the beginning of 2018, the industrial economy is in excellent condition. However, the UniCredit Bank Austria Purchasing Managers’ Index from January shows a general slowdown of the upward trend. However, the rate of expansion is only slightly below the record levels of the previous month and therefore continues to signal a very dynamic development of domestic industry. The so far very reliable forward indicator, namely the ratio of new orders to inventories, also deteriorated slightly compared with the previous month. However, it indicates that the sales warehouses are too low to handle the incoming orders without significant increases in production. Austrian industrial companies are very optimistic. The Future Output Index, which shows production expectations over the next 12 months, posted a slight month-on-month decline, but the outlook remains very positive at 68 points.

“The good start to 2018 has created an excellent mood in the industry. In addition to the ongoing strength of the domestic market, the favourable international economic environment in particular promises much support for Austrian producers of goods, which should especially benefit from the accompanying acceleration in global trade. We expect that, in 2018, industry will be able to repeat the strong production growth of the previous year of an estimated 4 per cent,” concludes Bruckbauer.

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