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29.11.2010

Bank Austria Purchasing Managers’ Index for November:
Industry remains on growth course

  • Bank Austria Purchasing Managers’ Index down slightly in November, but strong growth persists
  • Substantial increase in orders boosts the level of orders on hand
  • Employment rises again, with working hours and production even stronger at the moment
  • Increase in commodity prices accelerates inflation
  • Industrial growth expected to come in at 6 per cent for 2010 – weaker growth anticipated for 2011

The favourable trend in industrial activity continues. "Although the Bank Austria Purchasing Managers’ Index fell slightly in November from 56 points in the previous month to 55.2 points, Austrian industry continues to grow at an above-average pace," said Stefan Bruckbauer, chief economist at Bank Austria. For 12 months straight, the index has remained above the threshold of 50 points, which signals an expansion in the sector compared to the previous month. The current indicator has fallen well below the record highs seen in the summer but is still significantly higher than the long-term average. "The current survey of Austrian industrial companies shows a strong, sustained upward trend driven by robust order growth. Increasing order backlogs and longer delivery times are indicative of capacity bottlenecks, which means that new jobs are being created. However, strong increases in purchase prices are putting a damper on the favourable overall conditions," said Bruckbauer.

"The pace of the increase in production slowed somewhat in November but remains high. This is due to the robust upward trend in new business, with the strong rise in foreign demand for Austrian products gaining a bit of steam compared to the previous month," said Bruckbauer. In particular, the intense recovery of the German economy is providing a massive boost for Austrian industry and has made it possible for companies here to increase their order backlog consistently over the past year.

The accelerated increase in orders on hand in November is a clear indication that domestic industry is increasingly coming up against capacity limits as a result of the ongoing recovery of demand. Longer delivery times due to shortages of many commodities and some preliminary products also show that companies are still rather cautious in adapting their production conditions to meet the significant increase in demand. Nevertheless, robust employment growth is already taking place in Austria’s industry. "For eight months now, new jobs have been created in the processing industry. Following the decline by more than 7 per cent during the crisis, employment in the sector has increased by just over 1 per cent since it bottomed out around late 2009 and early 2010," said Walter Pudschedl, an economist at Bank Austria. This increase in employment comes alongside production growth of around 10 per cent in real terms since the low. This disparity is due not only to the more subdued adjustment of employment levels in response to the decline in production of roughly 18 per cent in real terms during the crisis, but also to the development of the volume of working hours. The number of hours worked fell rapidly during the crisis as a result of part-time work regulations, and the decline (of up to 12 per cent) was much more dramatic than the drop in the level of employment. Since the low, the number of hours worked has increased by over 6 per cent again, with few employees still working reduced hours. In the months ahead, we therefore expect the level of employment and the number of hours worked in industrial companies to develop relatively in parallel and to follow the production trend for the most part.

The currently favourable conditions for domestic industrial companies to take action are increasingly being hampered by the upward trend in purchase prices. "The increase in the price of numerous materials and commodities has significantly accelerated the rise in purchase prices compared to the previous month. However, strong competition has made it impossible to completely pass the higher prices on to customers. As a result, the price conditions for domestic industrial companies have deteriorated again for the fifteenth month in a row," explained Pudschedl.

The high level of the Bank Austria Purchasing Managers’ Index in November shows that industrial activity is still developing very favourably. Nevertheless, the decline compared to the previous month indicates that growth has already passed its temporary peak. "The upward trend in the sector will lose some of its momentum in the coming months. In 2011, industrial growth will remain somewhat below this year’s increase of around 6 per cent due to the slowdown of the global recovery," expects Bruckbauer.

"Since conditions have calmed down immensely in 2010, the steel industry will already be able to recover from last year’s crisis in 2011 thanks to above-average growth. The metal goods production and machinery industries will recover just slightly slower, but with somewhat of a delay," said Bruckbauer. In contrast, Bank Austria’s economists predict a relatively subdued outlook for the electrical and electronics industry due to its high level of dependence on construction activity.

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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Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, tel. 05 05 05 ext. 41957;
E-mail: walter.pudschedl@unicreditgroup.at

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