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27.09.2007

BA-CA Purchasing Managers' Index in September: Austria as Elysium? Industrial growth gains momentum again

  • Economic activity in Austrian industry bucks the global downward trend
  • Following a slowdown in industrial growth in the first half, things are on the up again
  • However, despite this, 2008 will bring weaker growth

The BA-CA Purchasing Managers' Index (PMI) confounded expectations again in September, rising from 54.5 to 55.4. Any values above 50 indicate growth. Marianne Kager, Chief Economist at Bank Austria Creditanstalt (BA-CA): "Contrary to the global trend, Austria's industrial production gathered speed again at the beginning of autumn.

 The BA-CA PMI has now recorded its third rise in succession since the beginning of the summer – and this across a wide base: "Production, incoming orders and employment rose more sharply in September than in August", said BA-CA economist Stefan Bruckbauer, summarising the results of the survey of purchasing managers. In concrete terms, the index for production rose from 54.1 to 55.9, the highest figure since March 2007. Incoming orders were also more buoyant in September than in August: the index in question rose from 52.7 to 53.8 with domestic orders growing more strongly than export orders. However, incoming orders from abroad also picked up in September – this index rose from 52.1 to 52.7. Parallel to the development in incoming orders, those surveyed were also more positive in their assessment of order books, where the figure rose from 54.1 to 55.1, the highest value since December 2006. As far as the employment situation in industry is concerned, the numbers employed rose more rapidly in September than in previous months with the index rising from 53.3 to 54.9.

"Improved demand and a renewed upturn in purchase prices allowed sales prices too to firm in September", says Kager. The index for purchase prices rose from 61.1 to 62.3, while that for sales prices increased from 53.2 to 54.0.

The BA-CA economists consider that the explanation for the increase in growth reported by Austrian industry – contrary to the trend throughout Europe – lies in the fact that Austria has been slightly ahead of the eurozone in the economic cycle since the end of the 2003 recession. "While Austria's industry emerged far more rapidly from recession than industry in the rest of the euro area after 2003, momentum and sentiment also suffered a more rapid downturn in the course of 2007", argues Bruckbauer. In the period from February to July 2007, the BA-CA PMI declined from 57.8 to 53.8, and growth in industrial production fell from 9.4% to 4.6%. "A further rise in the BA-CA PMI in September indicates that industrial momentum will once again pick up somewhat in autumn", says Kager. However, according to the BA-CA economists it remains to be seen whether this increasing momentum in Austria indicates that economic activity in the euro area will advance again. 

"One thing is certain: an improvement in industrial sentiment in Austria shows that a more serious economic recession is currently not on the cards", says Bruckbauer. In the medium term, however, the economists at BA-CA remain cautious and are continuing to expect growth to slacken in 2008, as the European economy slows. Following two years of strong industrial growth in most eurozone countries, particularly Germany, a reversal in the economic trend is not surprising. While the consequences of the mortgage crisis in the USA and the sharp fall in the US dollar represent additional risks here, they are certainly not major contributory factors to the trend reversal. 

Note: PMI figures above the 50.0 mark indicate growth compared to the previous month; readings below the 50.0 mark indicate contraction. 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.

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Enquiries: Bank Austria Creditanstalt Group Economics and Market Analysis
Stefan Bruckbauer, Tel. +43 (0)50505 ext. 41951
E-Mail: economic.research@ba-ca.com