Bank Austria Business Indicator:
Austrian economy grows in second half of 2009
- July sees further improvement of the Bank Austria Business Indicator
- The recession is coming to an end
- Special effects after significant adjustment of stocks and worldwide fiscal packages support temporary recovery until the turn of the year
- But the economy will remain weak in 2010 after a GDP decline of 3.5% in 2009
There are growing signs that the Austrian economy is poised for stabilisation. The Bank Austria Business Indicator has been moving upwards for the last three months. "With the rise from minus 2.1 to minus 1.8 points in July, our Business Indicator is pointing to a sustainable improvement in the business environment, which will be reflected in positive real economic data in the forthcoming months", says Stefan Bruckbauer, Chief Economist of Bank Austria.
The broadly-based correction of the indicator raises hopes that the economy is about to take a turn for the better. Towards the end of the summer, Austrian consumers and industry are again somewhat more optimistic about future prospects. In particular, improved sentiment within Europe's industry following recent increases in incoming orders, especially in Germany which is an engine of economic growth, suggests that the worst of the global crisis could now be over. The more favourable global conditions are also reflected in a slight improvement in industrial sentiment in Austria's production sector, which has returned to the level of last October. Although the trends in business expectations in Austria are lagging behind those of other European countries, they have improved for the fourth consecutive month. "We believe that the renewed quarter-on-quarter decline in GDP of 0.4 per cent in the second quarter signals the end of the recession. The third quarter will again see the Austrian economy record positive growth, for the first time since autumn 2008. We anticipate quarter-on-quarter growth of 0.3 per cent", forecasts Bruckbauer. Bank Austria's economists expect GDP to contract by 3.5 per cent in 2009 as a whole.
However, the upturn in the second half of 2009 is largely a result of two special effects. Firstly, the economic support programmes implemented by governments worldwide are now increasingly beginning to take effect and global demand is picking up. Secondly, this stimulates an economy which has reduced much of its stocks in the last few months, and the economy must therefore necessarily respond to an even moderate recovery in demand with significant increases in output. "Austria's export-oriented industry, which was not just the first to feel the impact of the global economic crisis but was also the most severely affected sector, will now be the first to experience the benefits of the recovery process", maintains Bank Austria economist Walter Pudschedl: "The most recent data are likely to result in noticeable increases in industrial output in the next few months, which should provide a basis for economic growth in Austria in the third quarter."
The economists of Bank Austria however have serious doubts about the sustainable nature of the recovery supported by special effects, which will probably be no more than a flash in the pan. "The economy will again lose some of its momentum when the additional impetus from the fiscal measures and the adjustment of stocks subsides. A noticeable slowdown in economic growth is therefore expected by the turn of the year", says Pudschedl. In view of the continued difficult situation on the labour market, which is increasingly impacting private consumption, the Austrian economy continues to be faced with difficult conditions. "The economic slump has come to an end. But there do not yet seem to be any forces which assure sustainable, self-supporting economic recovery. After a 3.5 per cent decline in GDP in 2009, we therefore expect to see no more than a continued stabilisation of the economy in 2010", says Bruckbauer.
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Walter Pudschedl, Tel. +43 (0) 50505 - 41957
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