BA-CA Purchasing Managers’ Index in August:
Brief correction: industry growth swells again
- Order intake up, stable growth in output
- Smaller rise in purchasing prices improves corporate earnings
The BA-CA Purchasing Managers' Index climbed up to 54.5 in August, after having improved modestly to 53.8 in July (any values over 50 signal growth). These moderate increases in industrial growth over the last two months constitute a cautious correction from the first half of 2007, when the Purchasing Managers' Index ultimately declined from 57.7 in December 2006 to 53.5 in June. Thus over the summer, this downward trend in growth seems to have been brought to a provisional halt. "In the course of the summer, Austrian industry has experienced moderate expansion", said Marianne Kager, Chief Economist at Bank Austria Creditanstalt (BA-CA), summarising the results of the latest surveys.
Order books improved significantly in August, with the index rising from 50.9 in July to 52.7. "The growth of domestic and foreign orders picked up in August, despite the increasingly difficult conditions on markets. Prior to this we had seen a constant fall since March", explained Stefan Bruckbauer from BA-CA. As proof of the difficult market environment he pointed to the modest declines in economic indicators on the export markets.
Industry output in August grew at roughly the same pace as in July. This means that only part of the increase in new orders has already been processed. Consequently, companies are sitting on thicker order books, as shown by the corresponding index, which rose from 53.4 in July to 54.1 in August. However, it was obviously not necessary to boost capacities any further, as employment growth in August remained at approximately the same level as the previous month.
The current survey also reveals that cost pressure has waned. Industrial purchase prices in August rose far more slowly than in July. In response to the relatively benign development in costs, companies expanded their stocks of primary materials, which is illustrated by the first increase of note in the relevant index in August since the beginning of the year (from 50.1 to 52.1). "Purchase prices are not rising as strongly as before, while there has been no change in sales price growth. This exerts a positive impact on the earnings of companies" explained Kager.
After industrial activity lost a great deal of momentum in the first half of this year, the months of July and August have signalled a modest correction. Nevertheless, industrial growth in June coming in at just below 5% was far below the value of the second six months in 2006, which totalled 10%. "The pace of growth in Austrian industry has halved over recent months. But our survey shows that, at least over the summer, there has been no further decline in growth", revealed Bruckbauer. Although the outlook for the autumn months is somewhat more subdued, no setback is expected.
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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