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Bank Austria Purchasing Managers' Index in June:
Austrian industry starts the summer with strong growth

• Renewed rise of the Bank Austria Purchasing Managers' Index, almost reaching the record level of April
• Strong increase in orders from abroad and within Austria, exports likely to expand
• Further boost to employment
• Purchase prices continue to rise sharply, increase in sales prices is less pronounced

After falling slightly in May, the Bank Austria Purchasing Managers' Index has returned to 59.0 in June. After April 2010 this is the second-highest level in the more than ten years since the Purchase Managers' Index was first launched. Stefan Bruckbauer, Chief Economist of Bank Austria, summarises the current situation in Austrian manufacturing: "Austrian industry will start the summer with the same high momentum which it began pursuing in April."

"The strong momentum which began in April has continued into June; Austrian industry will therefore record very positive growth also in the summer, in both a monthly and an annual comparison. At the end of the summer, output could again reach about 90 % of the level seen before the crisis", says Bruckbauer. This is clearly reflected by the indicator, which has been moving in the growth zone for more than six months. The volume of incoming orders again accelerated in June and has reached a very high level.

The level of orders from abroad (59.1 points) and the total volume of incoming orders (59.6 points) both impressively underline the dynamic growth of the industrial sector. Helmut Bernkopf, Bank Austria's Management Board member responsible for Corporate & Investment Banking is optimistic: "The strong growth of orders from abroad should also soon be reflected in export figures and Austria's export industry could again approach the growth rate of the global economy after lagging behind somewhat in the last few months". This momentum will continue in the summer, if not longer, as confirmed by the evaluation of orders on hand (57.2 points).

The turnaround in the employment situation in industry will also continue for the time being. Bruckbauer substantiates his optimism: "The companies that were approached in this survey once again said that they were intending to expand their workforce. This means that the recovery of the labour market will continue in the next few months."

But the data of the Purchasing Managers' Index also point to two negative developments. The respondents in the survey reported a continued marked rise of purchasing prices in June, although the momentum was a little slower than in the two preceding months. Purchasing prices nonetheless rose at a very strong rate and the index, at 68.8 points, is well above the historical average. Sales prices will continue to rise at a much slower rate, which is positive for customers but not so good for companies; in June, the figure was 54.1.

This, and the development of inventory, suggest that the recovery process may be anything but sustainable. In this context, delivery periods were longer in June, which is explained by strong demand but also by the significant reductions in inventory during the crisis. This development is also reflected in stock levels of production material, which were again substantially replenished in June to meet increased demand. "Companies are continuing to build up stock levels of production material while stocks of finished goods are still declining – a trend which also shows that the strong recovery is to a large extent explained by the inventory cycle", Bruckbauer explains, adding, "the development of inventory exhorts us to caution, reminding us that the pace of recovery could slow down in the autumn".

In the medium term, the development of Austrian industry will also be influenced by the further prospects of the global economy, which are still uncertain. Bank Austria's economists are therefore maintaining their rather moderate medium-term forecast of a return to slower growth by the Austrian economy after the strong growth expected in the summer.

 charts (PDF; 68 KB)

Please note: EMI figures which exceed 50.0 points indicate growth compared to the previous month, while figures below 50.0 signal a downturn. The larger the gap to 50.0, the stronger the growth or contraction trends. This information contains the original data from the monthly survey conducted among purchase managers in Austria's industry. The survey is sponsored by Bank Austria and conducted by Markit Economics under the patronage of the Austrian Center for Productivity and Efficiency (Österreichisches Produktivitäts- und Wirtschaftlichkeits-Zentrum – ÖPWZ) since October 1998.

Please direct inquiries to: Bank Austria Economics & Market Analysis Austria
    Stefan Bruckbauer, tel. +43 (0) 50505 - 41951
    e-mail: stefan.bruckbauer@unicreditgroup.at

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