Bank Austria Purchasing Managers' Index for April:
Global slowdown arrives in Austria
- Bank Austria Purchasing Managers' Index falls below the 50 mark in April
- Marked downturn in orders received
- Industrial growth comes to a halt
- Marked economic downturn in Austria following a strong first quarter
Following the surprisingly solid figures for the first quarter, the Bank Austria Purchasing Managers' Index (PMI) fell below the 50-point mark in April. For the first time in more than 30 months, therefore, it fell within the range that indicates negative growth. "The global downturn, aggravated by the negative effect of the strong euro, hit Austrian industry in April," said Stefan Bruckbauer, deputy chief economist of Bank Austria, on the sharp fall in the PMI.
The downward trend at the beginning of the second quarter covers a wide spectrum. All the sub-indices are moving downwards, with the level of new orders received being particularly badly hit. The overall index for orders received fell to 47.4, the lowest level in more than six years. Although few companies managed to gain new customers, there was a particularly marked widespread slowdown in demand from Austria's key markets abroad. The loss of customers to lower-cost competitors, including China, is reflected in the negative figures. "The pronounced fall in new business is weakening prospects for the future, and shows that Austria's export-dependent industry will be moving in more sluggish waters for the foreseeable future," says Bruckbauer.
The downturn in new business received is also clearly reflected in the order books. The index value for order books fell more sharply in April than it had for more than five years. The figure of 47.4 is not only below the index level of 50 but is also the lowest since records began. Consistent with this is reduced purchasing activity, which resulted in a fall in stocks of primary materials. Although employment levels in Austrian industry are still rising, "the marked slowdown in employment growth can already be seen as an indicator that this trend will be reversed before too long," says Walter Pudschedl, economist at Bank Austria.
The rapid rise in purchase prices continued throughout April. In addition to energy and metals, there was a particularly sharp increase in transport costs. Some companies in Austria reacted to this cost pressure by raising their selling prices, but global price competition and the strong euro are limiting their price-setting powers, with the result that selling prices are rising more slowly than purchase prices. "The present rise in costs is a serious problem for Austrian industry and will affect profits in the current year," says Pudschedl.
Austrian industry's long period of growth is coming to an end. Domestic production figures for material goods are expected to remain static in April compared with the previous year. Year-on-year growth rates are slowing down, although they are still positive. Our assessment of the economic situation – that the Austrian economy will begin the year strongly but will then begin to show signs of sluggishness – is confirmed by the current Purchasing Managers' Index. "We are therefore sticking to our growth forecast of 1.9 percent for the current year," summarises Bruckbauer, and goes on to say: "The increased risks within the economy mean that the opportunities for a fast recovery from the expected downturn are dwindling, with the result that GDP is expected to rise by only 1.8 percent in 2009, an even worse result than this year." However, there is no recession on the horizon.
Note: A PMI value above 50.0 indicates growth compared with the previous month; a figure below 50.0 indicates a drop. The further the figures are from 50.0, the stronger the trend towards growth or downturn. This bulletin contains original data from a monthly survey of purchasing managers in Austrian industry, sponsored by Bank Austria and carried out by NTC Research since 1998 under the auspices of ÖPWZ (Austrian Centre for Productivity and Efficiency).
Enquiries: Bank Austria Economics & Market Analysis
Walter Pudschedl, Tel. + 43 (0) 50505 DW 41957