Bank Austria Purchasing Manager's Index in July:
Austrian industry bottoming out
- More new orders for the first time in 18 months, output to rise soon
- Production levels still lower than last year
- Employment declines again
The Bank Austria Purchasing Manager's Index for July 2009 confirmed the improving conditions in industry with another hefty jump from 42.0 to 46.5. "Even though our Purchasing Manager's Index remained below the critical 50-point mark in July again with its reading of 46.5, some sub-components are showing signs for the first time in 18 months that Austria's industry is bottoming out," says Helmut Bernkopf, Bank Austria Management Board member for commercial customers and investment banking. Austria's purchasing managers reported slight increases in new orders in monthly comparison for the first time since March 2008. As a result, the order intake component of the index rose from 45.8 to 52.1, both for domestic and foreign customers. The export orders component surged into positive territory, going from 46.8 to 52.8. "Good responses were received especially for orders from Germany and Italy this time around," said Bernkopf. In line with the improvements in order intake, the assessment of order levels also improved in spite of the index component shrinking again slightly in July. The sub-index came in at 49, again just under the growth threshold of 50 and means that more orders were processed than were received.
"In light of the first slight increase in new orders, Austrian industry is expecting a slight monthly increase in production in July, the first such change in over a year," confirmed Stefan Bruckbauer, chief economist for Austria at Bank Austria. But he adds: "In spite of the expectations for a slight increase in production in July, we can't forget that Austrian industrial output in July will be over 15 per cent lower than in July 2008."
In line with the still very low production levels and despite the first slight improvement in many months, Austrian industrial companies again reported decreasing job levels in July. The corresponding index component showed a healthy rebound from 33.7 to 36.8, but is still well below the growth point of 50. The responses painted a similar picture for input materials stocks, which continued to shrink at the same pace as last month. The index component remained virtually unchanged at 36.1 (36.2 in June). Stocks of finished goods also remained essentially unchanged compared to June (a low 40.7 for July and 40.2 in June) and is indicative of a healthy dose of scepticism in Austrian industry regarding the emerging signs of recovery. "Austria's industry remains sceptical for now about how long the recovery will hold in spite of first positive signals. Employment levels and input materials stocks both show this caution," says Bruckbauer.
Bank Austria's economists read two tendencies for the coming months in the development of the Purchasing Manager's Index in July and the expectations for the further development of Europe's economy. "The positive change in order intake on the one hand and the continuing decrease in stock levels could bring some positive surprises on the production front in the coming months," says Bernkopf. He adds: "In spite of initial positive signals, the current very low level of production will significantly constrain investment activity and therefore the potential for growth in the Austrian economy as a whole for the time being." This also supports Bank Austria's economic projections of -3.5 per cent GDP growth in 2009 and -0.3 per cent in 2010.
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 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.
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Enquiries: Bank Austria Economics and Market Analysis
Stefan Bruckbauer, Tel. +43 (0) 50505 - 41951
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