Bank Austria Purchase Manager's Index in December:
Industry rapidly heading towards a low
- Bank Austria Purchase Manager's Index falls to its lowest level at the end of the year
- Sharp decline in new orders leads to massive cutbacks in output
- Industry sheds workforce at record rate
- Austria's industry will contract significantly in 2009; the Austrian economy will record negative growth
The performance of Austria's industry continues to deteriorate rapidly as 2008 draws to a close. The seasonally adjusted Bank Austria Purchase Manager's Index has fallen from 38.3 to only 35 points in December. The indicator has now remained below 50 – an area which signals contraction – for the ninth month in succession, a development which is unprecedented except for 2001. The trend differs to that of seven years ago in that the indicator has fallen to a much lower level. "The current development of the Bank Austria Purchase Manager's Index and the historical low in December show that an end to the sharp decline of Austria's industrial performance is still not in sight“ says Bank Austria's Deputy Chief Economist, Stefan Bruckbauer.
After Austria's industry showed itself to be surprisingly resilient to the deteriorating conditions of the global economy in the first half of 2008, this strongly export-oriented sector of the economy is now feeling the full impact of weaker economic activity worldwide. The surveys conducted among purchase managers reveal that output of Austrian industrial companies has been contracting since the middle of 2008. The output index has declined sharply in the past three months, falling to its lowest level of 34.4 points in December. "In light of the negative output trends in industry, we expect the economy to record slight negative growth in the fourth quarter of 2008. The Austrian economy has consequently departed from a growth path for the first time since the second quarter of 2001“ Bruckbauer states.
The slide in industrial output is directly linked to the downward trend in new orders since April this year. Demand for Austrian industrial products has reached a record low for the third consecutive month. The global economic downturn is reflected in an exceptionally sharp decline in foreign orders in December. "In December, demand for Austrian products from Austria's key trading partners was well down on previous months, quite apart from the marked contraction of demand from the US. This was particularly apparent among Austrian companies supplying component parts to the automotive industry“ says Walter Pudschedl, economist at Bank Austria. Due to the absence of new orders, backlogs of work were reduced significantly in December by using existing capacity. The erosion of the backlog cushion has now continued since April. Shorter delivery periods and the build-up of manufacturing inventories are further signs of the growing problems facing Austria's industrial sector.
"In light of lower output levels, Austrian industrial companies have shed jobs at a record rate in December. In most cases, fixed-term contracts were not extended and the numbers of loan workers were reduced" says Pudschedl. Austria's industrial sector has now been reducing its workforce for eight months, a process which has steadily accelerated in the past four months. Given the unfavourable level of orders, Bank Austria's economists expect the negative employment trend in the industrial sector to continue. This will have an impact on the country's economy in the course of the coming year. The number of people seeking jobs in Austria will increase by an average of about 30,000 in 2009. Unemployment is therefore expected to rise from 5.8 per cent in 2008 to 6.5 per cent in 2009.
The outlook for Austria's industry has temporarily reached its lowest level at the end of 2008. In view of the sharp fall in new orders and the rapid erosion of the backlog cushion there are currently no signs that the downturn experienced by Austria's industry could soon be coming to an end. The fiscal and monetary measures taken at the national and European levels have raised hopes that the situation could stabilise by the middle of 2009, although such hopes are not yet confirmed by any leading indicators. In light of the particularly unfavourable global conditions and the fact that all global markets are affected by the downturn, Austria's industry will probably recover only very slowly. "Industrial output will contract by about 4 per cent in 2009. The Austrian economy will consequently record negative growth of 0.5 per cent in the forthcoming year, and the economy will remain weak in 2010 with GDP growth of 0.7 per cent“ Bruckbauer says.
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)5 05 05 ext. 41957;