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27.11.2009

Bank Austria Purchasing Managers' Index for November:
Austria's industry takes a breather

  • Bank Austria Purchasing Managers' Index slips back below growth threshold in November
  • New orders and production increasing more slowly, but decrease in pace of staff cuts only moderate
  • Difficult price situation: inputs more expensive, downward pressure on selling prices
  • Just a temporary dip in the industrial recovery, global conditions driving persistent growth trend

As expected, the path of recovery is proving to be stony for Austrian industry. "The latest Bank Austria Purchasing Managers' Index has slipped back just under the growth threshold of 50 points. The noticeable surge reported by the surveyed industrial managers over the past months tapered off again in November," said Helmut Bernkopf, Bank Austria's director for Corporate and Investment Banking, summarising the results of the current survey.

Overall, the survey painted a mixed but not dire picture of Austria's industry. "Even though the pace of business has let up, the orders situation is still improving, and production is increasing," said Bank Austria's chief economist Stefan Bruckbauer, noting the current upward trend, "I expect that the current slip in the Bank Austria Purchasing Managers' Index will turn out to be nothing more than a breather after the strong comeback in the autumn, and of course also a reminder of how tenuous the current recovery still is."

According to the economists at Bank Austria, especially the continued growth in order intake is a sign that business in Austria's industrial sector will continue to pick up. "Even though the improvement in November was not as significant as in the month before, industrial firms have now reported solid order intake growth for the fifth month in a row. According to the polled industrial managers, exports are the greatest driving force, and production levels are still rising to keep pace," reported Bruckbauer. At 53.1 points for November, the production index shows that output increased by a very respectable margin compared to October. The fact that delivery times increased again shows that capacity utilisation is also slowly improving for Austria's industrial enterprises.

One factor hampering the recovery of Austrian industry is the difficult price situation. Significant increases in the prices of some input materials, especially crude oil and certain metals, caused purchasing prices to increase for manufacturers for the third month in a row in November. This increased cost pressure on the input side is unwelcome because it is virtually impossible to pass it on to the customers under the current general conditions. Because demand is only growing slowly at present, competition is fierce in the industrial sector. "While purchasing prices increased further, the decline in selling prices accelerated somewhat in November. This trend is putting considerable pressure on earnings for Austria's industrial firms, especially in combination with the currently tenuous recovery," said Bank Austria economist Walter Pudschedl.

Because demand is not returning to pre-crisis levels quickly enough and industrial capacity utilisation is not growing fast enough, companies are still being forced to make staff cuts to stay profitable. More manufacturing jobs were lost again in November.  However, the pace of job eliminations has slowed continuously since June of this year. "Because the headcount reductions in the sector are still considerably smaller than the nearly 15 per cent decline in production compared to last year, we can expect further job cuts in industry. If the pace of recovery remains so moderate, we are not likely to see a turnaround in the employment trend in industry until the second half of 2010," predicted Pudschedl.

The current survey of purchasing managers in Austrian industry showed no improvement for the first time in over six months. In fact, the overall index dipped back down to just below the growth threshold. According to Bank Austria's economists, however, this does not mean that the recovery has come to a halt. "In light of the improved global conditions, the positive development of some of the index sub-components – especially export orders – and the continued high ratio of orders levels to stocks, we are expecting to see activity in the industrial sector improve satisfactorily in any case in the coming months," said Bruckbauer. Based on the data for the first three quarters, goods production is now expected to decline by over 12 per cent in total for 2009. Thanks to the low base effect from this year, we will then see an increase of roughly 5 per cent on average in 2010. All in all, however, Austrian industry will not be able to make up its losses from the crisis by the end of 2010. Pre-crisis production levels will not be reached in the sector until 2012.

 charts (PDF; 60 KB)

Note: PMI figures above the 50.0 mark indicate growth 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 of purchasing managers from 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 Austria
Walter Pudschedl, Tel. +43 (0) 50505 - 41957
E-mail: walter.pudschedl@unicreditgroup.at

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