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27.04.2007

BA-CA Purchasing Managers’ Index in April:
Industrial activity in Austria past its peak

• From February to April, sharpest decline since 1998
• Domestic orders slowing in particular
• Austria clearly ahead of the rest of the euro-zone in the economic cycle

The Purchasing Managers’ Index of Bank Austria Creditanstalt (BA-CA) fell again in April from 55.6 to 52.9 (values above 50 indicate growth), its lowest level since October 2005. “The further downturn in the Purchasing Managers’ Index was surprisingly marked,” commented Marianne Kager, Chief Economist at BA-CA.

Following the slide in the BA-CA PMI of 2.2 points in March, the index fell by another 2.7 points in April. “With a drop of almost five points, the BA-CA PMI has undergone its sharpest downturn in a short space of time,” explained Stefan Bruckbauer. Never before in the almost 10-year history of the BA-CA PMI has the value declined so quickly within two months.

The deterioration in business confidence at the companies surveyed could be seen in virtually all the components, especially reported output volumes and the level of incoming orders. Down from 56.3 to 53.0, the output indicator still points to rising output volumes but the resultant growth rate is now clearly below the values of recent months. The slide in the indicator for new orders was even more pronounced with a fall from 54.0 to 51.4. “Growth in domestic orders, in particular, was considerably slower in April,” explained Kager. Although the pace of expansion in export orders also fell, the decline in the indicator from 54.2 to 52.1 was less pronounced as a result of the sustained dynamic growth in incoming orders from Germany and Italy.

The indicator for the backlog of work is also less optimistic as a result of slower growth in incoming orders. This figure dipped from 53.9 to 52.2 and the trend for the recruitment rate is the same. “Although employees are still being taken on, the rate is significantly slowing,” commented BA-CA economist Bruckbauer. The corresponding indicator fell from 54.9 to 51.8. Industry in Austria is therefore still working close to capacity despite slower growth in orders and output. This is also reflected by the fact that the delivery times for input materials have lengthened again, although not by as much as in recent months. The further and somewhat sharper rise in purchase prices with the indicator climbing from 61.3 to 63.5, and increased sales prices (value April 55.1) also confirms this.

The fact that industry in Austria is showing signs of a slowdown earlier than other countries in the euro-zone is not surprising according to the economists at BA-CA. “Austria’s industry is much further ahead in the economic cycle within the euro-zone,” explained Marianne Kager. “Austria’s industrial activities have expanded by 29 percent since 2003, the highest figure in the euro-zone after Ireland.” Growth in Austria was therefore considerably higher than the euro-zone at 9.9 percent and significantly higher than Germany at 16%. In Italy and France, growth in industry has been flat since 2003. The emerging recovery in some euro-zone countries will therefore help prevent Austria’s industry from slumping after growth has peaked. “Austria’s industry has expanded twice as fast as Germany and three times faster than the average for the euro-zone. The economy is now entering a calmer phase, but it will still benefit from the incipient recovery in the other euro-zone countries,” added Bruckbauer.

N.B.PMI figures above the 50.0 mark indicate growth on the previous month, readings below the 50.0 mark indicate a decline. The greater the divergence from 50.0, the greater the growth or contraction tendencies. 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 patronage of ÖPWZ since October 1998.

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Enquiries: Bank Austria Creditanstalt Economics and Market Analysis
Stefan Bruckbauer, Tel. +43 (0)5 05 05 ext. 41951
E-mail: economic.research@ba-ca.com