Bank Austria Purchasing Managers' Index in March:
Austrian industry gradually emerges from the crisis
- Bank Austria Purchasing Managers' Index sends out a strong growth signal in March
- Improved orders situation leads to the largest increase in production output for 20 years
- Sharp rise in purchasing prices, higher selling prices can be obtained again for the first time
- Industry drives economic recovery – sector to register higher than average growth of at least 4 percent in 2010
The recovery of Austrian industry is gaining in strength and stability supported by the more favourable global environment. "The sustained improvement in the orders situation is currently leading to an unexpectedly dynamic increase in production output in industry. The employment situation in the sector is slowly starting to stabilise and growing demand is once again making it possible to adjust prices to increased costs. At the same time, the replenishment of stocks is evidence of a sustained improvement in mood which is strengthening the expectation that the positive trend of recent months will continue", said Stefan Bruckbauer, chief economist at Bank Austria commenting on the results of the most recent survey of Austrian industrial companies.
In March, the Bank Austria Purchasing Managers' Index, which depicts the results of a survey of Austrian industrial companies on their business situation, continued the upward trend it has sustained for almost a year. "The latest Bank Austria Purchasing Managers' Index has improved to 56.7 points, a clear sign that Austrian industry will post strong growth in spring", said Bruckbauer. After a period of consolidation in autumn, the indicator has now remained well above the neutral mark of 50 points for more than three months.
The noticeable rise in production output in March is an impressive indication of the renewed vigour of Austrian industry. The output index has risen to 60.4 points, reaching its second highest level ever. "Due to steady improvements in the orders situation, Austrian industrial companies expanded production capacities in March faster than at any time in the last twenty years", said Bruckbauer. The level of orders on hand is rising steadily as new business continues to develop favourably. Domestic demand has recently risen significantly. The foreign market, which had been the driving force at the start of the recovery, is simply the somewhat stronger component at present, as the dynamic demand trend from abroad has slightly lost momentum. Data in the coming months will confirm whether or not this is the first sign of a slowdown in industrial activity in the medium term.
At present, however, the positive economic signals are still growing stronger. "For the first time since the middle of 2008, companies have increased their stocks of purchases, a clear sign that confidence in Austrian industry is slowly growing and that companies want to be better prepared for new orders as they anticipate growing demand", said Bank Austria economist Walter Pudschedl. Moreover, the cost-related reduction of stocks of finished goods that has continued over many months has started to lose momentum. Priorities are evidently slowly shifting away again from a single-minded focus on costs toward a risk-aware seizure of new business opportunities.
There is still a basic scepticism among Austrian players about the current recovery trend. This is reflected by, among other things, the fact that Austrian companies are now encountering difficulties obtaining materials because their suppliers do not have sufficient stocks and need more time to fill their orders. Average delivery times for industrial companies continued to lengthen in March as the majority of companies were obviously unprepared for such a strong increase in purchasing volumes. Consequently, purchasing prices rose more rapidly than in 1.5 years. However, selling prices also rose for the first time since autumn 2008. "For the first time in months, demand is strong enough to allow cost-related increases in purchasing prices to be at least partially passed on to customers. However, there is as yet no sign that the deterioration in price ratios for Austrian industrial companies witnessed over the last nine months will end soon", said Pudschedl.
The strength of the upturn in Austrian industry has increased significantly since the beginning of 2010, leading to an impressive comeback in the sector. The latest figures from the Bank Austria Purchasing Managers' Index show a surprisingly strong recovery momentum. Moreover, the positive economic signals for Austrian industry in recent weeks have improved across the board, underlining that the recovery has gained strength. As a result, the prospects for a continuation of the favourable trend have markedly increased. "It must not be overlooked that the current high level of momentum has been significantly influenced by the severity of last year's setback and the medium-term prospects will have to be judged much more conservatively as state economic stimulus programmes come to an end and strategies to reduce debt burdens are implemented. Nevertheless, the latest figures make it clear that Austrian industry is well on the way to finally emerging from the crisis", said Bruckbauer summing up.
charts (PDF; 128 KB)
Note: PMI figures above the 50.0 mark indicate growth, readings below the 50.0 mark indicate contraction in the manufacturing sector compared to the previous month. 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. This survey is sponsored by Bank Austria and has been carried out by Markit Economics under the patronage of ÖPWZ, the Austrian Productivity and Efficiency Centre, since October 1998:
Enquiries:Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel. +43 (0) 50505 - 41957