24You

The new online banking of Bank Austria.

BusinessNet

The online banking for companies.

olbImgAlt To the MegaCard GoGreen-youth account
MegaCard GoGreen-youth account. The free MegaCard GoGreen-youth account for everyone from 10 to 20 years, and receive a welcome gift. To the MegaCard GoGreen-youth account
27.11.2008

Bank Austria Purchaser Manager's Index in November: Currently no glimmer of hope for Austria's industry

  • Bank Austria Purchase Manager's Index falls to an all-time low in November
  • Slump in new orders, backlogs of work falling to meagre levels, decline in output
  • Purchase prices start to decline sharply, sales prices also ease
  • Output losses expected for Austrian industry in 2009 

Austria's industry, which is particularly susceptible to global developments on account of its strong export orientation, is increasingly affected by the global economic downturn. This is clearly reflected in the marked fall of the seasonally adjusted Bank Austria Purchase Manager's Index in November, from 43.6 to 38.3 points. The indicator has now reached a historic low. Apart from the currently low level it is the unusually sharp downturn of the last few months which is particularly striking. The slowdown of the global economy, amplified by the global financial crisis, has unnerved economic players, a temporary situation which is reflected in an exceptionally defensive market. "Aside from the fact that the current slide of the Bank Austria Purchase Manager's Index to a record low – driven by cautionary reasons – is out of character with normal trends, Austria's industry is entering a deep phase of consolidation and this process is taking longer than expected“, says Bank Austria's deputy chief economist Stefan Bruckbauer.

According to the latest survey, Austria's industrial output has been contracting for the last six months. In November, the output index fell by more than ten per cent. Following this sharpest decline on record, the output index slumped to a record low of 38.2 points. Bank Austria's economists believe that the length and severity of a recession experienced by the Austrian economy will depend on the development of the industrial sector. The decline of the Bank Austria Purchase Manager's Index in November underlines our fears that the Austrian economy will enter into recession in the first half of 2009“, Bruckbauer says.

"The dramatic deterioration of new orders is a key indicator of a protracted downturn of Austria's manufacturing sector“, Bank Austria economist Walter Pudschedl explains. According to the replies of industrial managers, the volume of new orders, which has been shrinking since the beginning of the year, fell sharply in November. While the decline of previous months, prompted by the unfavourable global conditions, is largely attributable to the lower level of export orders, demand in Austria has meanwhile also weakened significantly. In the absence of any impetus, backlogs of work in the industrial sector are thinning out. Future prospects are above all dampened by the low order levels and the break in the ratio of new orders to stocks, in the past an indicator which provided reliable information for industrial performance.

November has seen the first month-on-month fall in purchase prices since the summer of 2003, largely a result of the fall in oil prices in the wake of the global economic downturn. While the easing of prices on the input side is very welcome, it has not noticeably improved the general conditions in light of the low level of orders. Given the current weak demand, manufacturers are faced with even tougher competition, forcing them to further lower sales prices. "In light of the sharp fall in the price of some commodities, Austrian manufacturing companies have little possibility to maintain the good profitability levels of previous periods. Profit margins will shrink in the next few months“, says Pudschedl.

On account of a further deterioration of the global economic climate, especially in Austria's key trading partners, the further prospects for Austrian manufacturing are generally regarded as being rather bleak. Bruckbauer summarises the outlook for Austria's industry: "As Austria's export-oriented industry cannot shield itself from the unfavourable global conditions, we expect output to contract significantly in 2009 after growing by about 1 per cent in the current year“. The second half of 2009 may start offering possibilities for a slow recovery; with high output levels after the structural renewal measures of past years and relatively moderate wage agreements, Austria's industry is well-placed to benefit early on from a global upward trend.

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.

 charts

Enquiries: Bank Austria Economics & Market Analysis
Walter Pudschedl, Tel. +43 (0)5 05 05 ext. 41957;
 e-mail: walter.pudschedl@unicreditgroup.at

 back to the summary