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30.12.2009

Bank Austria Purchasing Managers' Index for December:
Positive end to the year for Austrian industry

  • Bank Austria Purchasing Managers' Index moves back into growth territory in December
  • Subdued expansion in production due to weaker growth in orders
  • Pace of job losses slows significantly towards year-end
  • Mild improvement in manufacturing industry of +4% in real terms for 2010

"Business continued to improve for Austria's industry in December. Following the catastrophic beginning, 2009 is ending on a mildly positive note, thanks to the sustained recovery in domestic manufacturing since the summer," said Bank Austria's chief economist Stefan Bruckbauer, discussing the latest survey results of the Bank Austria Purchasing Managers' Index, which edged slightly higher to 50.8 points. During the last four months, the index has surpassed the threshold of 50 three times, with this mark signalling sustained growth tendencies compared to the previous month.

The improvement in business conditions for Austrian industry is occurring on a broad basis, but progress has been very slow recently. The sub-component for output showed an increase in December, for the sixth month in a row. The rate of increase, however, weakened for the second time running, and December's gain was also the lowest since the beginning of the current expansionary cycle. "Production by Austrian industrial enterprises has been rising without interruption for the last one-half year, but this rebound has now lost some of its initial momentum," explained Bruckbauer.

The slowdown in the pace of recovery is a result of declining gains in new orders. While the volume of new orders for Austria's industry rose again in December thanks to more intense restocking by customers, the increase was the smallest recorded in the last six-month period of expansion in demand for Austrian-made products. "Order volumes from Austria and abroad are both increasing at a slower rate than in the previous months, whereby international demand continues drive production activity for Austrian firms, thanks to quite strong gains in new business," reported Bank Austria economist Walter Pudschedl. This is in line with a modest increase in purchasing activity, whereby the higher prices for certain key commodities such as plastics and steel were a negative factor for companies in December. Another challenge is found in the renewed decline in sales prices, due to the persistently strong competition.

Even now, one-half year since passing the low point in the economic cycle, the process of adjusting employment levels to the lower production needs has not been fully completed. For the 20th month in a row, more jobs were lost in Austrian industry again in December. Although the decline in staff levels did slow down tangibly in December, in light of the modest pace of improvement no turnaround on the labour market is likely, at least not in the first half of 2010. "During the recession in 2009, Austrian industry cut its headcount by around 6 per cent, or 30,000 jobs. This has brought employment in the sector back to levels from before 2006," said Pudschedl. The Bank Austria economist expects to see a further increase in the rate of unemployment in the economy as a whole to 7.8 per cent, up from 7.3 per cent on average for 2009.

The current survey of purchasing managers at Austrian industrial firms shows that domestic and foreign demand for investment goods is only recovering slowly. Prospects are limited, due to the small orders backlog and the reserved increases in orders intake. According to Bank Austria's economists, the decline in vehicle production will only come to an end sometime during 2010, after registering very sharp drops of over 20 per cent in 2009. Under the current conditions, it looks increasingly unlikely that there will be a very strong rebound in the coming year for certain key capital goods producers and some important automotive industry suppliers. In 2009, the steel industry suffered a decline in production of 27 per cent and machine building and metals production both fell by just under 20 per cent, and it appears that these industries will not be able to recoup these losses until 2012 at the earliest. In 2009, the electrical and electronics industry, another major branch of capital goods production, benefited from the infrastructure investments within the framework of the economic stimulus programmes, as the decline in production in this industry remained relatively modest, at around 10 per cent. Nonetheless, as these programmes come to an end, the recovery in 2010 will be subdued. "As an average for the sector, we project an increase of around 4 per cent in industrial production in the year ahead. On the heels of the massive slump of around 12.5 per cent in 2009, however, this is a relatively modest uptrend and will result in considerable business challenges for many domestic producers," noted Bruckbauer, in relation to the growth prospects for Austrian industry, which should be able to profit directly from the reserved global recovery thanks to its stronger-than-average focus on exports.

 charts (PDF; 69 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. 05 05 05 ext. 41957;
E-Mail: walter.pudschedl@unicreditgroup.at

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