Bank Austria Purchasing Managers' Index in April:
Austrian industry exits the crisis at full speed
- Bank Austria Purchasing Managers' Index leaps to all-time high in April
- Production growth reaches record level and allows reversal of employment trend
- Unfavourable price trends are increasingly posing a risk to economic recovery
- Bucking the crisis makes industry main driver of Austrian economic growth in 2010
Austria's domestic industry is now fully caught up in the global recovery. "The record growth in incoming orders is significantly bolstering the order books, with the result that production output is expanding rapidly. New jobs are being created in Austrian industry once again for the first time since the start of the crisis. The sharp rise in purchasing prices is a burden, yet the positive signals clearly outweigh it and are allowing Austrian industry to recover at a dramatic rate", said Stefan Bruckbauer, chief economist at Bank Austria, summarising the results of the most recent survey of Austrian industrial companies.
The business climate, which is being viewed once more as generally favourable by domestic industrial companies, is clearly reflected in the rise in the Bank Austria Purchasing Managers' Index in April. "The latest Bank Austria Purchasing Managers' Index has attained a new record high of 60.3 points. Since the start of the year, Austrian industry has been able to gather considerable momentum and is now experiencing an upwards trend stronger than ever previously observed since calculation of the indicator began twelve years ago", said Bruckbauer. It is important to note that many branches of industry suffered significant losses during the course of the previous global economic crisis, which is partly responsible for the strength of the present countertrend.
With a record increase in production output, Austrian industry is currently making great strides to leave the crisis behind it. The decisive factor in this is the huge improvement in the orders situation. Demand from abroad, especially from outside Europe, increased in April to attain a new record high. As a result, the rise in the total volume of new business even managed to exceed the previous record demand level of 2006 by a significant amount. The dynamic development of new orders was followed by a major increase in the level of orders on hand. "In view of the boom in new orders and rapidly filling order books, domestic industrial companies are under great pressure to expand capacities. As a result, the sector has recruited new staff again for the first time in two years", said Bank Austria economist Walter Pudschedl. Just under six months after Austrian industry hit rock bottom, there are now also signs of a reversal in the trend on the sector's labour market, with even relatively strong growth in employment in April. Increasingly, domestic industrial entrepreneurs are beginning to view the current phase of recovery as sustainable.
The only fly in the ointment in the current survey are the present price trends facing the domestic industrial companies. The increase in purchasing prices accelerated dramatically in April. "In view of the fast-rising demand, raw materials like steel, plastics, paper and pulp have become much more expensive. Although it proved possible to push through a significant rise in sales prices, this was considerably less than the rise in costs", said Pudschedl. The deterioration in price ratios for Austrian industrial companies witnessed over the last ten months is still ongoing and is increasingly posing a risk to the sustained continuation of the economic recovery.
Apart from this burden, the latest survey of Austrian industrial companies shows increasing signs that the upswing in industry is not only dynamic but also sustainable. One such sign can be seen in the stock trends: businesses are beginning to build up their stocks of raw materials once again, in order to be better prepared for strong demand. Stocks of finished goods, on the other hand, are continuing to decline because market demand cannot be met with current capacities. The ratio between the new business index and the index for warehouse stocks, which has been favourable for a whole year now and has always proved itself to be a good indicator of the future industrial economy, also points to a sustained upward trend. "The many positive detailed results of the latest Bank Austria Purchasing Managers' Index lead one to expect that Austrian industry will continue unabated on its growth path in the current year and will expand by at least four percent in real terms. As such, industry will be the major driver of domestic economic growth in 2010", expects Bruckbauer.
charts (PDF; 68 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