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28.08.2009

Bank Austria Purchase Manager's Index in August:
Tail wind for Austrian manufacturing

  • Bank Austria Purchase Manager's Index reaches growth threshold
  • Marked improvement in incoming orders, output rising again
  • Upturn after adjustments to stocks will be only temporary in the second half of 2009
  • Growing signs of stabilisation of the industrial sector despite a slowdown after the turn of the year

The performance of Austrian manufacturing has stabilised. The downturn has ended. "In August, the seasonally-adjusted Bank Austria Purchase Manager's Index climbed to 49.9, returning to the growth threshold of 50 points for the first time since spring 2008. The signs of a recovery of Austrian manufacturing can no longer be overlooked", says Bank Austria's Chief Economist Stefan Bruckbauer.

The cautious optimism of Bank Austria's economists regarding a favourable development of manufacturing in the coming months is in particular justified by the improvement in orders. Following renewed stronger demand for Austrian industrial products, the indicator for new orders reached a sound level of 55.2 in August. The improvement is largely attributable to a sharp rise in domestic orders, while Austrian exports also received an impetus from the stronger momentum of the global economy. "In August, Austria's industrial companies experienced the strongest increase in orders in over 2 ½ years. Output has therefore been stepped up significantly compared with the previous month", says Bruckbauer.

The positive trend in new business and output did not prevent further job losses in August. But the decline in employment has slowed in the meantime. "As the upturn is not yet fully underway and companies are still in the process of adjusting their workforce levels to output, which is more than 10 per cent below the level of the previous year, the next few months are likely to see further layoffs in Austrian manufacturing. This will push up the number of persons seeking work in Austria to about 370,000" explains Bank Austria's economist Walter Pudschedl. The figure corresponds to an unemployment rate of 10 per cent in the upcoming winter.

The tail wind benefiting Austrian manufacturing is reflected in the current development of stocks and in the delivery periods which are, after one year, again slightly longer. "For the first time in over one year, stocks of purchases have fallen more slowly than stocks of finished goods, and brisker demand has led to a contraction of stocks of finished goods not seen since the Bank Austria Purchase Manager's Index was first launched in October 1998" says Pudschedl.

The stock cycle is generally a key factor for the evaluation of future trends in Austrian manufacturing by Bank Austria's economists. Stocks have fallen to their lowest levels after being significantly adjusted in the last few months. A slight revival in demand therefore already triggers noticeable increases in output. This is a situation which has now occurred as the impact of the government support measures becomes more discernible. Austrian manufacturing, which contracted by an average of over 15 per cent in real terms in the first half of the year compared with 2008, will significantly increase output in the coming months.

As the recovery of Austrian manufacturing is largely a result of special effects prompted by the substantial adjustment of stocks and the economic support programmes implemented worldwide, the upturn in the second half of 2009 is not likely to be sustainable. Industrial growth will again lose momentum as soon as the additional impetus subsides and is expected to start contracting after the turn of the year, if not earlier. "The performance of Austrian manufacturing has stabilised, but factors that could assure a sustainable recovery are not discernible. After a two-digit contraction in 2009, industrial output will grow by about 5 per cent in 2010 due to the low baseline comparison with 2010, despite sluggish economic activity next year", Bruckbauer maintains. The output of Austrian manufacturing at year-end 2010 will consequently be well below the levels prevailing before the onset of the economic crisis.

 charts (PDF; 88 KB)

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) 50505 ext. 41957
e-mail: walter.pudschedl@unicreditgroup.at

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