Austrian industry once more continued on its path of growth in February, but at the same time the very high increases from late 2017 can no longer quite be achieved. “The UniCredit Bank Austria Purchasing Managers’ Index (PMI) continues to show Austrian industry is very dynamic at 59.2 points in February.
However, all indicators point to the fact that the peak in positive sentiment, as was expected, has passed, and although growth therefore remains high, it is no longer increasing," said UniCredit Bank Austria’s chief economist, Stefan Bruckbauer.
Austria’s industry consistent with Europe
After the all-time high of almost all components of the indicator in late 2017, the momentum in the first two months has diminished somewhat for all components. Austria’s industry is consistent with the most important trading partners in the Eurozone, who also had to accept a slight drop from their record levels at the end of 2017 in the first two months of 2018. “The slight decrease in the sentiment regarding Austria’s industry in the first two months of 2018 runs parallel to the development in the Eurozone,” analysed Bruckbauer. “But as is the case in Austria, despite this slight decline, the momentum in the Eurozone remains very high from a historical perspective, and this means a very dynamic industrial sector in the entire Eurozone at the beginning of 2018.” Furthermore, the UniCredit Bank Austria PMI for Austria is slightly above that of the Eurozone, but for the first time since November 2017 somewhat below the PMI for Germany, although the differences are very slight. All purchasing manager indices, however, have one thing in common: they are significantly above the growth threshold of 50.0 points.
“All partial indicators were responsible for the slight decline of the UniCredit Bank Austria Purchasing Mangers’ Index in February, however, export order growth and, as a result, output growth suffered the largest declines, whilst growth slowed down as new jobs were created," said Bruckbauer, explaining the most important detailed results from the monthly survey of Austrian purchasing managers.
Continued order growth domestically and internationally
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. “The order level of Austrian industrial companies continues to grow, although noticeably less strongly than in the previous three months,” said UniCredit Bank Austria economist, Walter Pudschedl. 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, if somewhat less than in recent months
“Despite the slightly lower growth of new orders received, the backlogs of work also grew in February, as did the quantity of purchases, but growth was also below the record levels of recent months in this area,” said Pudschedl. For example, the indicator of the order level dropped from 64.7 points in December and still 60.4 in January to 57.9 points in February. At the same time, the value for the quantity of purchases fell from 64.8 in December and now stands at 60.4 points. However, in December the values for both indicators, as for the UniCredit Bank Austria PMI as a whole, were at an all-time high.
Furthermore, Austria’s industrial companies are confronted with sharply rising input prices, even if momentum in this area declined somewhat in February. However, the growth rate in the output prices barely dropped, meaning that the earnings situation for Austria’s industrial companies relaxed again somewhat. “Given the strong demand, Austrian companies were again able to compensate for the input prices in February, which continued to rise sharply, by also increasing output prices. As momentum dropped for the input prices, but barely slowed for the output prices, the industrial earnings situation again improved somewhat in February,” said Pudschedl.
Industrial growth of 4.5 percent for 2018 in sight
The industrial economy in Austria is still in very good shape in February. Although the survey within the framework of UniCredit Bank Austria PMI for February again shows a slight slowdown in the upward trend which started in January, the rate of expansion still remains very high from a historical perspective. The previously very reliable forward indicator, namely the relationship between new orders to inventory stocks, has also deteriorated slightly once again in comparison to the previous month, but still shows that the stocks of finished goods are too low to process the orders received without significant production increases. The Future Output Index, which shows production expectations over the next 12 months, also posted a slight month-on-month decline, but the outlook remains very positive at 66 points.
“Despite the drop in the UniCredit Bank Austria Purchasing Managers’ Index to 59.2 points in February, prior to the current period of strength, such a high value for Austrian industry had only been achieved in four months since 1998. This underscores just how strong Austria’s industry remains and we therefore expect strong production growth of 4.5 percent to continue in 2018", said Bruckbauer in conclusion.
Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0)5 05 05-41957;