BA-CA Purchasing Managers Index in July:
Growing Employment in Industry
- Overall positive momentum of industrial activity improves employment
- Industrial growth rate could hit 8% in summer
After the extremely high level reached in June (58.0), the BA-CA Purchasing Managers' Index has fallen back slightly to 57.1. "In the long term, the Austrian economy could not be expected to maintain the very strong momentum indicated by our PMI in June," said Marianne Kager, chief economist at Bank Austria Creditanstalt (BA-CA). "But the current readings in the BA-CA PMI indicate that Austrian industry can look forward to continued strong growth in summer 2006".
It is noticeable, although hardly surprising given the recent international trend, that purchasing managers reported a somewhat stronger demand for exports in July. The relevant indicator rose from 56.7 to 57.9. In contrast, domestic demand was unable to maintain its strong momentum, as a result of which overall order growth fell slightly. At 57.6, the figure for this indicator was slightly lower than in June (59.6).
Purchasing managers also reported very strong production growth in July. At 57.5 the index was well above the 50 mark. Production figures have been rising month after month for over a year now. According to Kager, "industrial growth could reach approximately eight percent this summer."
Employment Figures in Industry have been Rising for Eight Months
One positive side-effect of this sustained strong industrial growth is that rising levels of employment have been reported for eight months now. In July the index reached its highest level in more than six years when it hit 54.7. "The speed with which employment figures are rising has increased again. Full order books combined with brisk production is increasingly leading to higher employment," Kager says.
This strong demand is also leading to longer delivery times and in some cases to supply shortages - notwithstanding rising production volumes and capacity expansions. In addition, managers continue to report steep price increases. At 71.3 percent, the index is not only very high, it has also risen once again. At the same time, due to the burgeoning economy, companies are increasingly able to raise their prices. The index climbed from 55.6 to 56.2, the highest reading since the survey was introduced.
2.5% Growth for 2006, Downturn not Before 2007
Economists at BA-CA believe that the momentum of industrial activity will weaken again somewhat in the next few months. "But at present there are no signs of a noticeable slowdown in the economy. The upturn is continuing for longer than originally anticipated," Kager concludes. The BA-CA economists believe that economic growth of approximately 2.5% in 2006 is assured, with a possible slowdown only becoming apparent at the start of 2007 at the earliest.
Note: PMI figures above the 50.0 mark indicate growth; readings below the 50.0 mark indicate contraction in the manufacturing sector compared to the previous month. The greater the divergence from 50.0, the greater the change signalled. This report contains the original data from the monthly survey among purchasing managers of industrial companies in Austria. The survey is sponsored by Bank Austria Creditanstalt and has been carried out by NTC Research under the auspices of ÖPWZ, the Austrian Productivity and Efficiency Centre, since October 1998.
Enquiries: Bank Austria Creditanstalt Economics Department
Marianne Kager, Tel. +43 (0)5 05 05 ext. 41950