Bank Austria Purchasing Managers' Index in February:
Austrian industry just grows and grows and grows

• Bank Austria Purchasing Managers' Index reaches new high in February 2011
• Record growth in incoming orders
• Strong production expansion translates into rapid employment growth
• Visibly higher costs, but businesses' market power rises

Austrian industry continues to stride forward on its recovery path at an increasing pace. "Hitting 61.9 points in February the Bank Austria Purchasing Managers' Index reached a new high. The demand for Austrian industrial products is rising at a record speed, production is expanding fast and new jobs are being created. These robust dynamics are pushing industry to the limits of its capacity, which is resulting in rapid price growth, longer delivery times and orders piling up", said Bank Austria chief economist Stefan Bruckbauer, summarising the key results of the monthly survey conducted among purchasing managers at Austrian industrial companies.

There is just no end to the good news from Austrian industry. Never before in the more than 13-year history of the survey for the Bank Austria Purchasing Managers' Index has there been such a clear improvement on such a broad basis. The sharp increase in demand for products of Austrian industry stands out from the results of the survey. "Incoming orders grew at record speed in February both on the domestic market and from abroad. Consequently, Austrian industrial companies once again expanded their production to a huge extent", added Bruckbauer. This component came up only just short of the 7-month high from January.

What is particularly pleasing is that we are now seeing stronger growth in employment in Austrian industry, which has been experiencing an upswing for 1½ years now and over this time has continually expanded its production. Confidence in the sustainability of the economic upswing has risen sharply in view of the boom in new orders and the ever-thicker order books, while the reluctance to take on new staff is fading. "Austrian industry, which experienced downsizing on a massive scale owing to the feeble global demand, has got the job conveyor belt in motion again. More new jobs were created in the sector in the month of February than ever before since the survey began", revealed Bank Austria economist Walter Pudschedl. Roughly one third of the businesses surveyed reported higher employment, while jobs were lost at only five percent.

In addition to the sharp increase in employment there are also growing signs that Austrian industry is increasingly finding it difficult to satisfy the booming demand, and is encountering capacity problems on an ever more frequent basis. For example, the huge increase in production and the record employment gains in February were not enough to prevent a faster increase in the order backlog. Although the inventories of finished goods were tapped to satisfy demand, average delivery times in February were extended at the second-highest rate ever measured. The sharp and demand-induced increase in prices for primary materials and commodities fits in well with this overall picture. "Purchasing prices rose at a record rate in February. Industrial companies were able to pass on the higher costs to some extent in the form of higher sales prices. The continuous rise in sales prices for a year coupled with yet another record high in the given component suggests that the pricing power of businesses has risen strongly", argued Pudschedl.

The Bank Austria's Purchasing Managers' Index for February demonstrates that Austrian industry is in a very favourable position at present. The pick-up in the pace of growth around the turn of the year was carried on into 2011, increasing even further. The high demand for orders and the current backlog of orders indicate that this dynamic industrial development will remain for the time being. The correlation between the index for incoming orders and that of inventories is almost at an all-time high. Hence, what so far has been a very informative indicator for estimating industrial economic activity suggests that the upturn in Austrian industry will remain strong in the first half of 2011 at any rate. "Industrial growth throughout 2011 will total around 6 percent in real terms, very close to the high figure from last year, even if risks to growth shall increasingly include the rapid rise in costs caused by growing commodity prices and the political uncertainties", explained Bruckbauer.

 charts (PDF; 88 KB)

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.

Enquiries: Bank Austria Economics & Market Analysis Austria
 Walter Pudschedl, Tel. 05 05 05 Ext. 41957;
 E-Mail: walter.pudschedl@unicreditgroup.at