24You

The new online banking of Bank Austria.

OnlineBanking & BusinessNet

The familiar online banking for private customers and companies.

28.10.2010

Bank Austria Purchasing Managers' Index for October:
Austrian industry on its way towards a strong winter

  • Bank Austria Purchasing Managers' Index remains at a constantly high level in October
  • Strong production increases despite declining gains in order intake
  • Hefty increase in staff levels
  • Still impossible to fully shift the rise in purchasing prices to selling prices
  • Industry growth expected to reach an annual average of up to 7 per cent in real terms in 2010

"Following the positive developments in order intake in the previous months, Austrian industry saw strong increases in staff levels and production in October. Although the number of new orders continues to rise, its growth has slowed somewhat. The same is true of orders on hand, and the significant rises in input costs continue to hamper domestic companies," said Stefan Bruckbauer, the chief economist at Bank Austria, outlining the current trends in Austria's processing industry.

The Bank Austria Purchasing Managers' Index (PMI) provides an overview of the situation in Austrian industry in the form of a total number. "At 56 points in October, the Bank Austria Purchasing Managers' Index is just a tick below the value from the previous month, so it is still signalling a fast growth rate," said Bruckbauer. Austrian industry has been enjoying an upswing for a year now, during which time the indicator has remained above the growth threshold of 50 points. Although the rate of growth has now weakened somewhat, industry continues to experience a very robust recovery.

In recent months, conditions have developed much more favourably for Austrian industrial companies than was originally expected. "The strong boost coming from Germany is keeping business going in Austria and has made it possible for Austria's industry to absorb the burden of rising commodity prices and strong fluctuations in exchange rates. Production increased significantly in October – much stronger than in the previous two months," said Bruckbauer. The production index rose to 58.1 points, putting it well above the long-term average.

"The strong growth in production required a considerable increase in staff capacities. Industry saw a greater increase in employment levels in October than it had since the autumn of 2006," said Walter Pudschedl, an economist at Bank Austria. During the crisis, there was a stronger decline in production than in staff levels. Production in the processing industry fell by 12.6 per cent in 2009, while staff levels decreased by just around 6 per cent. Many skilled labourers remained employed – often with the public support of part-time work regulations – and the level of productivity per actual working hour in Austria's industry fell by around 5.5 per cent in 2009. Since the recovery began, production has risen much more rapidly than employment, and productivity is increasing again. This remained the case in October, when employment growth gained momentum, but still remained weaker than the increase in production.

In terms of earnings, intense efforts are being made to increase productivity, especially since Austrian industry has faced difficult conditions in recent months as a result of the price developments on the commodity markets. Higher energy and primary material prices are having a negative effect, although the average purchasing prices are no longer rising as rapidly as they were six months ago. The increase in selling prices was much weaker in October. "Due to the harsh competitive environment, it is currently impossible to fully pass the additional costs resulting from higher purchasing prices on to customers," explained Pudschedl.

The Bank Austria Purchasing Managers' Index is currently giving inconsistent signals with regard to the future development of Austria's industry. On one hand, the level of growth in new business declined slightly in October, with export orders in particular losing a great deal of momentum. Also, the level of orders on hand is not growing as rapidly as before. On the other hand, delivery times have increased and the ratio of order intake to inventories has risen again in comparison to the previous months – a development that has been a sure sign of rapid industrial growth in the past. "Since the signs of an acceleration in industrial growth are balanced out by the signs of a slowdown, it seems certain that for the most part Austria's industry will at least be able to maintain the level of growth achieved in October in the months to come. We now expect industrial production to increase by up to 7 per cent in real terms for 2010 as a whole," said Bruckbauer. Industry will maintain its strong momentum into next year, when it will make a very important contribution to the continuation of the overall economic recovery.

 charts (PDF; 147 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

 back to the summary