Bank Austria Purchasing Managers' Index in January:
Robust increase in industrial growth to start year
- Bank Austria Purchasing Managers' Index closes in on record level in January 2011
- Massive production growth thanks to pick-up in orders
- Build-up in capacity pressure leads to rapid increase in jobs
- Powerful rise in purchasing prices dampens favourable growth outlook for industry
Austrian industry is in rude health at the start of 2011. Hitting 60.3 points in January the Bank Austria Purchasing Managers' Index came close to the record reading from April of last year. Visible growth was registered in orders and the ongoing expansion in production was accelerated, leading to a record rise in employment. "The pleasant overall picture though is overshadowed somewhat by the strong increase in prices", said Bank Austria chief economist Stefan Bruckbauer, summarising the key results of the monthly survey conducted among purchasing managers at Austrian industrial companies.
The latest Bank Austria Purchasing Managers' Index indicates an improvement in the business positions of Austrian industrial firms compared to the previous month that is unparalleled in terms of pace and breadth over the 12½ years the survey has been carried out. Every single component of the entire index posted strong growth in January. The rapid improvement in orders made a significant contribution to the overall increase. "Demand for the products of Austrian material goods manufacturers has picked up sharply since the start of the year; the rise in orders was the second highest since records began. It is not only the growth in new orders from abroad that picked up sharply in January, orders in Austria too managed to post some impressive growth", revealed Bruckbauer. It is clear that the positive effects of the global recovery are increasingly spilling over into Austria.
"Austrian industrial companies have evidently reacted to the dynamic growth in the order intake by markedly expanding production. The production index soared to its highest level for six months at 60.3 points", said Bank Austria economist Walter Pudschedl. Business-owners are gaining in confidence with regard to the sustainability of the ongoing economic recovery and the expectation that the positive trend in orders will continue. "The high production demands have prompted Austrian industrial companies to hire new staff at a record rate in the course of January. More than 20 percent of the surveyed companies have created new jobs in the last month, while downsizing only took place at 6.5 percent", said Pudschedl.
Capacity in use of Austrian industry has risen sharply in previous months and now finds itself back above its long-term average again. Many industrial companies have obviously already reached their limits in terms of capacity, since expansion has been cautious so far. Existing capacities must first be adapted to the robust demand. According to the estimates of the Bank Austria economists there is now even some pent-up demand for investment. "Austrian industry is currently experiencing some pressure on capacity, which in addition to the record growth in order backlogs and the considerable extension of delivery times is signalled by the growing pressure on purchasing prices", explains Pudschedl.
The increase in average purchasing prices picked up dramatically in January; in fact the rise has never been as strong since records began. The robust demand coupled with bottlenecks and insufficient inventories at suppliers have triggered a sharp rise in prices for many commodities and primary materials. "In addition to fuels and energy we also observed sharp price increases for many industrial metals, electronic components, plastics and agricultural commodities in January. This resulted in a steep increase in sales prices as well. In view of the strong demand, Austrian industrial companies were clearly in a much better position than in previous months to pass the higher costs on to customers", said Bruckbauer. Overall though, cost conditions for Austrian industry continued to worsen in January, albeit moderately.
Following a temporary slump in late autumn Austrian industry is now again enjoying a period of rather dynamic demand. "Austrian industrial sectors which are stable and very competitive in the international arena can hold their own extremely well in the global post-crisis climate. Following in the footsteps of their German industrial peers, the upswing in Austrian industry is currently gaining in stability and becoming more broadly based", says Bruckbauer. The correlation between the index for incoming orders and that of inventories – which in the past has always been a very informative indicator for estimating industrial economic activity – shows that Austrian industry is set to continue down this growth path in the coming months. "For 2011 we expect average growth in industrial production of at least 5 percent. The sharp increase in prices for commodities and primary materials, however, will increasingly become a risk factor that could deprive Austrian industry of some momentum in the course of the year. At any rate, the pressure to rationalise in the sector is building strongly", added Bruckbauer.
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;