Bank Austria Purchase Managers' Index in August:
Industrial downturn eases off
- Bank Austria Purchase Managers' Index improves slightly in August, but industry still hit by recession
- Output and new orders continue to contract
- Companies experience slight relief through current price trends
- Lacklustre global growth dampens outlook for industry well into 2009
The seasonally adjusted Bank Austria Purchase Managers' Index recovered some ground in August. After falling sharply in recent months, the index climbed from 47 in July to a current 48.6. This is however still below 50, indicating that the situation in Austria's industrial sector again deteriorated over the previous month. "Even if the index no longer points downwards in August, it does not mean that the recession experienced by Austria's industry is over; the downward trend is simply less pronounced", says Stefan Bruckbauer, Deputy Chief Economist of Bank Austria. Bank Austria's economists believe it is still too early to interpret the reversal of the index as a bottoming out of negative developments.
Austria's industry slid into recession only a short while ago. The trough has not yet been reached. As the prospects for the global economy are even bleaker, it will be some time before there is any sign of a turnaround. This is underlined by the low level of new orders. The volume of orders from within Austria, and particularly from abroad, continues to contract. The index for the output of Austrian industrial companies has consequently remained below the growth threshold for the third successive month. "The further prospects for Austria's industry are currently not too bright", says Bruckbauer and adds "Its growth of about 3.5 per cent in the first half of 2008 has reversed quite significantly, so that the industrial sector will at best stagnate in 2008 as a whole".
Austrian industry has for some months now been adjusting its workforce to the weaker business conditions. August saw a further shedding of jobs, for the fourth consecutive month. Although the number of jobs cut in August was not as high as in the previous month, Bank Austria's economists believe that the labour market will continue to be adversely affected by overall developments. The employment situation in the industrial sector will deteriorate further in the course of the next few months, with negative implications for the general economy. "In 2009, Austria will see higher unemployment and longer unemployment periods, fewer job opportunities and more difficult times for problem groups in the labour market, such as older employees", says Bank Austria economist Walter Pudschedl.
With higher input prices and energy prices, Austrian industrial companies were again faced with sharply rising purchase prices in August, even if a slight easing of the upward price momentum was supported by the development of oil prices. The increase in output prices accelerated for the third successive month. In August, the gap between purchase and sales prices therefore widened for the first time since the beginning of the year. "The ability of Austria's industrial companies to pass on prices to the consumer is limited in view of sluggish demand, something which will continue to have negative implications for the costs and the profitability of companies in the current year and in 2009", Pudschedl says.
Austria's industry benefited from the improvement of several external parameters in the last few months. This included a fall of about 6 per cent in the exchange rate to the US dollar and of 10 per cent in the oil price in euro terms. But the more favourable global conditions have not yet provided any significant impetus to industrial companies. The negative outlook for the international economy, which in the opinion of Bank Austria's economists has deteriorated further in recent weeks, is too bleak. The repercussions of the US housing crisis, which shows no sign of abating, dampen the growth prospects for the US and Europe. A marked slowdown in economic activity is particularly discernible in Germany, a key market for Austria's components supply industry, which reduces any growth prospects for Austria's industry and consequently also for the entire Austrian economy. "We expect GDP growth of 2 per cent in 2008 to be followed by growth of only 1.2 per cent in 2009", says Bruckbauer. As neither Austria nor the euro area reveal any significant imbalances, Bank Austria's economists believe that Austria will be able to pull out of the economic downturn in 2009.
charts (PDF; 69 KB)
Note: PMI figures above the 50.0 mark indicate growth compared with 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, which 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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