Bank Austria Purchasing Managers' Index for August:
Austrian industry loses momentum, but growth remains robust
- Bank Austria Purchasing Managers' Index sinks in August, but remains well above the long-term average
- Declining growth in new orders puts a damper on production growth
- Industry continues to create jobs, but the number of new job offers decreases
- Unfavourable price trends pose a challenge to Austrian companies
- Ratio of new orders to inventories indicates further slowdown in industrial growth in the months ahead, although growth will remain robust
- Industrial growth now expected to come in at around 5 per cent in 2010
In a turnaround from last year's economic crisis, Austrian industry has posted unusually strong growth over the past six months. However, the support coming from increased global demand as a result of the inventory cycle is now starting to weaken and is hampering the expansion trend. Following a period of record figures around the 60-point mark starting in April, the Bank Austria Purchasing Managers' Index came in noticeably weaker in August. "Despite the decline to 55.9 points, the current Bank Austria Purchasing Managers' Index is well above the growth threshold of 50 points and clearly exceeds the long-term average. The industrial recovery in Austria remains exceptionally robust," said Helmut Bernkopf, Bank Austria's Management Board member responsible for Corporate & Investment Banking.
All five of the components included in the calculation contributed to the overall decline of the indicator to a six-month low in August. "The noticeably lower growth rate in new orders played a particularly strong role in the decline of the Bank Austria Purchasing Managers' Index compared to the previous month. The slowdown in order growth – which was much less dramatic for foreign orders than for new domestic orders thanks to the ongoing economic upturn in Germany – put a damper on production growth among Austrian industrial companies in August," explained Stefan Bruckbauer, chief economist at Bank Austria. "Despite the latest decline, there is still a very steady stream of new orders, and the order backlog has grown further."
"Although the creation of jobs slowed slightly in comparison to the prior month, the strong increase in employment figures in August can be viewed as a clear indication that the industrial economy is still a force to be reckoned with," said Bruckbauer. Despite the latest cooldown, the upswing in Austrian industry is so strong that capacity bottlenecks continue to occur. Many of the surveyed purchasing managers faced difficulties delivering primary materials and raw materials, resulting in significantly longer delivery times. Without this limitation, the massive increase in purchasing volumes would have been even stronger and the inventory of primary materials would not have stagnated for the first time in six months.
Due to the limited availability of many materials, including metals, chemicals and electronic components, average purchasing prices increased slightly faster than in the previous month. "The strong increase in purchasing prices in August, triggered by delivery difficulties due to strong demand, was accompanied by the weakest increase in selling prices in over six months. As a result, the deterioration in the cost situation that began in August 2009 is continuing at a slightly slower pace, which is posing very difficult challenges for Austrian industrial companies under the current economic conditions," stated Bruckbauer.
Following the slight decline in the Bank Austria Purchasing Managers' Index last month, the much stronger correction of the indicator in August shows that industrial activity is clearly losing steam after a very strong summer. Nonetheless, there are some indications that industry will continue to drive the economic recovery in Austria with impressive momentum. The order situation is still improving greatly, and the level of orders on hand is rising. Although the ratio of new orders to inventories, which is a very reliable indicator of coming industrial activity, has deteriorated significantly since the record levels seen at the end of 2009 and the beginning of 2010, it still points to robust sector growth. "Owing to the very dynamic developments over the summer, we have actually raised our growth forecasts for Austrian industry slightly and now expect industrial production to increase by an average of around 5 per cent in 2010. While some input sectors such as the steel industry and metalworking are already operating at around pre-crisis levels again thanks to strong recovery trends, we anticipate that most sectors will continue to see rather mixed developments," said Bruckbauer. "On average, we expect that it will take until 2012 for the sectors to get back to the production levels seen in 2008."
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.
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