24You

The new online banking of Bank Austria.

BusinessNet

The online banking for companies.

olbImgAlt To the MegaCard GoGreen-youth account
MegaCard GoGreen-youth account. The free MegaCard GoGreen-youth account for everyone from 10 to 20 years, and receive a welcome gift. To the MegaCard GoGreen-youth account
15.10.2007

BA-CA Business Indicator:
Economic mood begins to turn

  • Domestic sentiment is now clearly deteriorating
  • Mood abroad continues to decline
  • Growth in the second six months, however, remains above the long-term trend

Bank Austria Creditanstalt's (BA-CA) business indicator fell in September from 4.8 to 4.3. This equals the biggest drop in 2.5 years. "Foreign demand, which has been slowing down for some time, is now beginning to dampen domestic economic sentiment too", says Marianne Kager, chief economist at BA-CA.

For the first time, consumer sentiment in Austria also experienced a downturn. "The crisis in the financial markets and the increase in inflation depressed the mood of consumers, although they do remain optimistic about a further fall in unemployment", according to BA-CA economist Stefan Bruckbauer.

The global economic slowdown ought now to be reflected in domestic industrial sentiment . With foreign orders down over the summer, the order situation at home is now deteriorating. "Industrial sentiment in our most important sales markets is at its lowest for a year", stresses Marianne Kager.

Slowdown in economic momentum during the second half of the year
According to BA-CA's economists, the trend in the business indicator confirms their expectation of an economic slowdown in the third and fourth quarters of 2007. "Austria’s economy looks to have peaked during the first half of the year, although growth in the second six months too remains clearly above what has been the average for many years", says Bruckbauer qualifying the anticipated economic slowdown.

BA-CA economists only expect growth rates to fall to what has been the long-term average of just over 2 percent in 2008. In this respect, consumption should nevertheless be a mainstay. "Despite the fall in consumer sentiment, this is still clearly above the long-term trend. We therefore expect a recovery in consumption in Austria in future", states Bruckbauer.

However, for the economy as a whole, economists are assuming that there will be a slowdown next year, and accordingly expect overall Austrian economic growth of 2.3 percent in 2008 following 3.3 percent in 2007. They anticipate that there will be a "soft-landing" in the USA, the economy in the eurozone will slow to around 2 percent of growth and the euro will not appreciate further against the dollar. If the USA cools off more significantly, the eurozone grows noticeably less than 2 percent and the euro rises to over 1.50, growth of well under 2 percent should be expected for Austria. If this were the case, though - and at the moment it is not expected to be - Austria would still not be threatened by recession, even if the risks to the economy have again increased in the last month.

 charts

Enquiries: Bank Austria Creditanstalt Economics and Market Analysis
Stefan Bruckbauer, Tel. +43 (0) 50505 - 41951
E-mail: stefan.bruckbauer@ba-ca.com