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28.02.2008

BA-CA Purchasing Managers’ Index in February: Industry still growing, but more slowly

  • BA-CA PMI edged down in February
  • Production, order backlog and employment growth slowing
  • Record-high euro curtailing orders from abroad
  • Rising purchasing prices a negative factor  

The BA-CA Purchasing Manager’s Index (PMI) sank from 54.1 to 52.4 in February. The index has been weakening consistently over the past months in spite of its upward and downward fluctuations, and is now at its lowest level in 36 months. However, a value above 50 indicates that domestic industry is still growing. “Activity in the Austrian industrial sector is losing some of its momentum, but is still speeding up,” says Stefan Bruckbauer, deputy chief economist at Bank Austria Creditanstalt (BA-CA). However, last year’s robust growth rates are out of reach now.

Especially the paltry rise in order intake is dampening the outlook. The index for overall new orders has fallen to 51.2, well under the average for 2007 (52.9) and the level posted in January (53.0). While some companies were able to win new customers, demand is falling across the board in key foreign markets. “Export orders actually declined in February,” says Bruckbauer, and adds: “The difficult international conditions are having an increasing impact on Austria’s industry.” The fact that the economies of Austria’s most important trading partners are slowing and the strength of the euro, which surpassed USD 1.50 for the first time in February, are taking a bite out of business for heavily export-oriented companies.

The slackening order intake is already having an effect on the order books and production levels. Order backlog nearly stagnated in February, and production growth slowed considerably. The index component for production output fell from 54.8 in January to 53.1 in February and is now well below the average for 2007 (54.7).

BA-CA Purchasing Managers' Index and components

 

BA-CA
PMI

New
orders

Output

Employ-
ment

Suppliers'
delivery times

Stocks of
purchases

Prices 1)

Backlog
of work 1)

Oct.07

 52.8

 50.1

 52.1

 54.8

 42.2

 51.0

 58.1

 50.3

 Nov.07

 55.0

 53.5

 55.7

 56.8

 44.5

 53.2

 57.2

 53.5

 Dec.07

 53.2

 52.6

 52.3

 54.1

 44.2

 51.8

 58.7

 50.9

 Jan. 08

 54.1

 53.0

 54.8

 55.4

 44.7

 51.2

 64.9

 53.3

 Feb. 08  52.4  51.2  53.1  51.5  45.8  52.9  64.3  50.3

 

 
 

 

 

The index component for employment fell to 51.5 in February (January: 55.4). “In spite of the fact that the sector is no longer as robust, Austrian industry is still creating new jobs, just at a markedly slower rate,” says BA-CA economist Walter Pudschedl.

The industrial sector is still fighting with a hefty increase in purchasing prices. Prices are up for energy and transport services and especially for inputs such as wood and metals. Industrial companies have responded to this increasing cost pressure by raising their own selling prices, but not fast enough to entirely compensate for the jump in purchasing prices. And selling prices increased less in February than in January. “The fact that the selling price index component is lower than in January shows that the companies are not free to set prices because of the falling demand. Their profit margins are shrinking,” says Pudschedl. The current environment of fierce competition and economic cooling will breed growing challenges for Austrian industry in the coming months.

 Chart

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 Creditanstalt and has been carried out by NTC Research under the auspices of ÖPWZ, the Austrian Productivity and Efficiency Centre, since October 1998.

Enquiries

Bank Austria Creditanstalt Group Economics and Market Analysis
Walter Pudschedl, Tel. +43 (0)50505 ext. 41957
E-mail: economic.research@ba-ca.com