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Bank Austria Purchasing Managers' Index in May:
Austria's industry still feels strong upturn

• Bank Austria Purchasing Managers' Index slightly declines in May compared with the record level of the previous month
• Dynamic development of incoming orders leads to ongoing high speed of growth
• Industry hires new staff again
• Strongly rising purchase prices are a burden
• Capital goods industries show fastest recovery

Austria's industry is expanding again. "The favourable development of incoming orders supports the ongoing production expansion by industrial enterprises. The strong rise in input cost is a burden but an increase in jobs and inventories indicate an increase in confidence in the sustainability of recovery", Bank Austria chief economist Stefan Bruckbauer describes the current situation in Austria's manufacturing industry.

"The record value of April is not reached at the moment but the speed of growth in the sector still is very fast. This is indicated by the current Bank Austria Purchasing Managers' Index which amounted to 58.2 points in May after slightly more than 60 points in the previous month", Mr Bruckbauer says. The index thus is above the growth threshold of 50 points for the sixth month in succesion and on ist second-highest level in 3.5 years. Moreover, the recovery in the Austrian industry has consolidated further since the upturn trend is taking place on a broad level. All components of the latest survey among Austrian purchasing managers indicate favourable values.

The production performance already rose in the eleventh month in succession and the increase in May was very strong again. This is primarily a result of the considerable increase in new orders. "Demand for Austrian industrial products has been increasing since July 2009 already. In particular, orders from abroad show a very favourable development thanks to the economic recovery outside the EU which has accelerated considerably. Given the full order books, domestic industrial enterprises started hiring new staff in May again", Bank Austria economist Walter Pudschedl says. New jobs are created in the sector for the second month in succession already. Last year, however, almost 37,000 jobs were cut in total. According to the Bank Austria economists, the creation of new jobs will be continued in a very restrained manner in the next few months if at all and many jobs cut during the crisis will be lost forever.

"The favourable conditions for the domestic industry suffered from the strong increase in purchase prices in May. On the one hand, this was a result of stock bottlenecks on the part of suppliers and on the other hand, the weaker euro has become apparent as the import of raw material has become basically more expensive", Mr Pudschedl says. Due to stronger demand, local companies were at least able to pass on the increase in cost to customers. In May, purchase prices were raised to an extent as it happened more than two years ago.

The current survey among Austria's purchasing managers clearly indicates that the industry is experiencing quite favourable conditions at the moment which leads to expectations of an ongoing dynamic development of the sector. Manufacturers of capital goods have started recovering fast. Upturn will be above average in the steel, metal goods production and mechanical engineering industries. Real growth rates of 7 to 9 per cent are expected for 2010. The upturn in the consumer goods industries such as the food industry will be considerable more moderate and prospects for industries close to construction are strongly limited as the public budget is restricted. "The domestic industry will register average real growth of production of 4 per cent this year, thus being able to make their mark as growth engine of the national economy. However, it will take many industries until 2012 at the earliest to make up for the huge losses during the globally weak economic situation", Mr Bruckbauer expects.

Remark: Values of the Purchasing Managers' Index above 50.0 refer to growth over the previous month while values below 50.0 indicate a decline. The more the value differs from 50.0, the bigger is the trend of growth or decline. This document includes original data of the monthly survey among purchasing managers of Austria's industry, sponsored by Bank Austria and made by Markit Economics under the auspices of ÖPWZ since October 1998.

 charts (PDF; 68 KB)

For further inquiries: Bank Austria Economics & Market Analysis Austria
   Walter Pudschedl, Tel. 05 05 05 / 41957;
   E-Mail: walter.pudschedl@unicreditgroup.at

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