Bank Austria Purchase Managers' Index in October:
- In October, the Bank Austria Purchase Managers' Index fell to its lowest level since autumn 2001
- Weak order levels result in record decline in output
- Job losses accelerate
- But Austria's industry is well-placed to successfully meet the challenges of the crisis
The situation in Austria's industry is becoming more acute. In October, the seasonally adjusted Bank Austria Purchase Managers' Index fell from 46 to 43.6 points, the lowest level in seven years. The current decline is moreover one of the sharpest since the Index was introduced over ten years ago. The indicator has been moving at a level below the growth threshold of 50 for the seventh month in succession. This is the longest downturn since 2001. "On account of the low level of the Bank Austria Purchase Managers' Index in October, and given the extent and length of the downturn, Austria's industry has not yet hit bottom in the current business cycle" says Stefan Bruckbauer, Deputy Chief Economist of Bank Austria, adding "We expect Austria's manufacturing industry to reach its lowest point in the first half of 2009".
The longer term nature of the current downward trend is underlined by the fact that in October all components of the Bank Austria Purchase Managers' Index contributed to the Index's overall deterioration. The output index recorded a particularly sharp fall, sliding by 4.5 points to a historical low of 42.5. "The contraction tendencies characterising Austria's industrial output over the past five months have become more marked in October as a result of the greater uncertainty from the global economic downturn", says Bruckbauer.
Austria's industry has therefore already been feeling the impact of the global economic slowdown for a number of months, a fact which has been reflected in the decline in orders since the spring. October saw a further marked weakening of foreign and domestic demand for Austrian manufactured goods. More than 40 per cent of respondent companies stated that orders from abroad were down on the level of the previous month. "The strong export orientation of Austria's industry is resulting in an absence of export orders as the global economy slows down, in a lower volume of new orders and a further throttling of output", explains Walter Pudschedl, economist at Bank Austria.
In light of the fall in new orders Austria's industry has further adjusted capacity to the lower output requirements, and in October it stepped up the shedding of jobs which began six months ago. The loss of jobs, a component of the Bank Austria Purchase Managers' Index, has been the highest in six and a half years. While the service sector is still in a position to offset the job losses in industry, the deterioration of global conditions will also affect other areas of the Austrian economy in the coming months. This is likely to spur unemployment. "We assume that unemployment will rise from 5.8 per cent in 2008 to at least 6.2 per cent in the following year, driven – but not exclusively – by developments in Austria's manufacturing" says Pudschedl.
The outlook for Austria's industry started to darken some months ago as the global economic slump began to take its toll. The further deterioration with more pronounced contraction tendencies, reflected in the Bank Austria Purchase Managers' Index for October, is to be seen in the light of the rapidly rising uncertainty prompted by the escalating financial crisis, and is therefore somewhat exaggerated in the opinion of Bank Austria's economists. Austria's industry, given the difficult conditions, is facing much tougher times which will be reflected in negative business results for some months to come. But structural reforms which have already been implemented have put Austria's industrial sector, and indeed the entire economy, in a position whereby it can successfully meet the challenges of the economic downturn. Bruckbauer summarises the economic forecast of Bank Austria: "Austrian industry will probably record growth in 2008. In 2009 it is likely to contract for the first time in fifteen years, but we do not expect the downturn of the Austrian economy to last longer than that of 2001 to 2003".
charts (PDF; 69 KB)
Note: PMI figures above the 50.0 mark indicate growth in the manufacturing sector 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 and has been carried out by Markit Economics under the auspices of ÖPWZ, the Austrian Productivity and Efficiency Centre, since October 1998.
Enquiries: Bank Austria Economics & Market Analysis
Walter Pudschedl, Tel. +43 (0) 50505 ext. 41957
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