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Bank Austria Purchasing Managers' Index in September:
Industry grows for the first time in one and a half years

  • Bank Austria Purchasing Managers' Index increases to 50.3 points in September
  • Solid growth in order intake leads to production increases, but still no end to declining employment
  • Higher raw material prices place pressure on companies
  • Increased chance of a stable upswing

"In September, Austrian industry returned to the growth path for the first time in eighteen months. Demand has increased again, leading to a rise in production. However, the current price trends are creating pressure and the continued decline in employment shows that we have still not completely weathered the economic crisis," says Stefan Bruckbauer, chief economist at Bank Austria, summarising the results of the current Bank Austria Purchasing Managers' Index.

In September, the seasonally adjusted Bank Austria Purchasing Managers' Index exceeded the 50-point growth threshold for the first time since March 2008, coming in at 50.3. This means a continuation of the upward trend since the index bottomed out last winter, but with less momentum than in the previous months. "The recovery has started, but Austrian industry is only in first gear and the motor of economic growth is still not running smoothly," says Bruckbauer, describing the current situation for industry.

According to Bank Austria's economists, the solid increase in new orders should be taken as a cautiously optimistic sign for the coming months. Positive economic growth and inventory increases on the part of customers are behind the increases in order intake from the domestic and foreign markets. According to the survey, many companies have also gained new customers, particularly from the EU. "The order books are currently well stocked again, primarily as a result of the positive development in export orders, which have now increased for three months in a row. This means that in September, the net volume of orders increased again for the first time in one and a half years," says Bank Austria economist Walter Pudschedl.

For the third month in a row, improved order intake has led to an increase in production in comparison to the prior month. However, Austrian industrial companies have continued to lay off employees. The number of industry jobs has declined continuously since May 2008. In comparison to the prior year, the sector has lost 50,000 jobs in recent months. "Layoffs will continue in the coming months. This is due to the fact that the decline in production output during the crisis, which amounted to 15 per cent in comparison to the prior year, was around double the decrease in employment on average. And we must assume that domestic industry will not be able to recover the ground it lost in the economic crisis quickly enough," says Pudschedl. Bank Austria expects the unemployment rate for the economy as a whole to increase to an average of 7.4 per cent in 2009 and 8.2 per cent in the coming year.

Besides the fact that the adjustment in personnel capacities to meet the current level of demand is still incomplete, the current price trends are now placing additional pressure on domestic industrial companies' cost situation. Purchasing prices increased in September for the first time in a year, with the acquisition costs for raw materials such as metals increasing in particular. In contrast, selling prices have declined again due to intense competitive pressure. The quotient from the index for purchase prices and selling prices therefore shows an unfavourable development for industrial companies for the first time in a year. We also expect an increase in demand for raw materials in the coming months due to the global recovery, which will cause purchase prices to continue to trend upward. "In the existing competitive environment characterised by surplus capacity, it will be very difficult for companies to pass on the increase in costs for raw materials to their customers through their selling prices. The tense earnings situation for companies could therefore put a stop to the nascent recovery," says Bruckbauer. However, according to the estimates of Bank Austria's economists, the economic risk of strong increases in raw material prices is manageable. In fact, the sustainability of global demand will play a more important role in deciding whether the current economic recovery will remain a mere flash in the pan or will become the beginning of a stable growth period. "As the current results of the Bank Austria Purchasing Managers' Index show, there have been increasing signs in recent weeks that the economic recovery, which is based on global economic stimulus packages and the favourable ratio between new orders and inventory levels, will gain in stability. The chances of it turning into an internally driven upswing have improved, although the developments on the labour market represent a formidable economic risk," says Bruckbauer.

 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
 Walter Pudschedl, Tel. 05 05 05 ext. 41957;
 E-mail: walter.pudschedl@unicreditgroup.at

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