Bank Austria Purchasing Managers’ Index for December:
Reason to celebrate for Austrian industry as New Year’s approaches
- Bank Austria Purchasing Managers’ Index rises again in December
- Strongest growth in orders since the summer supports robust expansion of production as 2010 winds down
- Inventory management and the pronounced rise in employment point to increasing confidence in a solid recovery
- Austria’s industry will contribute 50 per cent to economic growth in 2011
Austrian manufacturing is ending 2010 on a very strong note. "Bank Austria’s Purchasing Managers’ Index hit its highest level since the summer, rising to 57.5 points in December. A robust increase in new orders, brisk expansion of production, strong gains in employment, longer delivery times and another deterioration in price conditions are some of the key aspects of the best performance seen in this indicator in the last six months," explained Bank Austria’s chief economist, Stefan Bruckbauer.
Demand for Austrian manufactured products picked up sharply in December: at 59.3 points, the index for new orders hit its highest level since June and one of the highest levels ever recorded. The particularly robust increase in orders from abroad is behind this development. "Excellent business conditions for the manufacturing sector in Germany are generating very strong increases in orders for Austrian suppliers, and consequently manufacturing output rose very vigorously in December as well. For the last 18 months now, Austrian manufacturers have been constantly increasing their production levels," noted Bruckbauer.
Since the beginning of 2010, the backlog of orders has been on the rise, with a particularly strong surge seen in December. Due to the uncertainty caused by the massive slump in 2009, Austrian manufacturing companies initially showed a hesitant reaction to the increasingly stable recovery in industrial production. In the view of the economists at Bank Austria, it is now becoming clear that there is growing confidence in the sustained nature of this upswing. "Austrian manufacturers are taking an increasingly pro-active approach to the improvement in business conditions, both in the field of inventory management and employment, as stocks and staff levels are currently being expanded," explained Bank Austria economist Walter Pudschedl. Purchasing volumes expanded at the second-fastest pace registered since launch of the Purchasing Managers’ Index more than 12 years ago, resulting in increasing stocks of primary materials. Stocks of finished goods expanded more strongly than any other time in the last two years. The December rate of growth in employment was also the second highest registered since the survey was started. Almost 18 per cent of the respondent companies reported new hiring, whereas only around 5 per cent reported reductions in staff levels.
Due to the tangible increase in prices of primary and raw materials, average purchasing prices rose dramatically in December, with strong upward trends seen in prices of chemicals, cotton and metals for example. As a result, producers also raised their sales prices at a new record-setting pace in December. "Demand is now strong enough again to be able to pass on at last some of the cost-driven price increases in purchasing prices to customers. Nevertheless, there is still no end in sight to the deterioration in price conditions for Austrian manufacturing firms that has been seen over the last one and a half years," said Pudschedl.
The current Purchasing Managers’ Index clearly reflects the robust performance of the Austrian manufacturing industry, which – tracking developments in the German economy – has been able to take advantage of the global economic recovery to stage an impressive come-back after the massive slump in 2009. "For 2010, we are projecting production output in the manufacturing sector to increase by 6.5 per cent in real terms. Hence, following the decline of over 12 per cent in 2009, there is still a gap of almost 7 percentage points left before production returns its earlier levels," explained Bruckbauer.
Industrial growth forecast at 5 per cent in 2011
There are some indications that Austria’s industry will be able to almost close this gap in 2011, thanks to consistently high growth in industrial production. The volume of new orders continues to rise strongly and order backlogs are also growing. The ratio of orders intake to inventories, which functions as a very reliable indicators for prospective business development in the manufacturing sector, is not quite approaching the record-setting level from around the turn of 2009/2010, but nevertheless points to more very robust growth in the sector in the months ahead. "As an average for the sector, we project a real increase of around 5 per cent in industrial production in 2011. Even though some industries, such as the steel industry and some metalworking branches, are already operating at pre-crisis levels again, in general it will only be possible to fully catch up to the production level from 2008 during the course of 2012," said Bruckbauer.
In 2011, manufacturing will once again be the driving force behind the economic recovery in Austria. "Even though industry only accounts for around 20 per cent of total economic output, it will generate roughly one-half of the GDP growth of 2 per cent in 2011, thanks to its higher than average growth rates," noted Bruckbauer confidently.
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.
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Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel. 05 05 05 ext. 41957;