Bank Austria Purchasing Managers' Index for August:
Austrian industry activity stops rising, Austria’s industry has stagnated for the first time in two years

• Bank Austria Purchasing Managers' Index decreased to 50.1 points in August and has reached the growth threshold for the first time in two years
• Losses in orders have again triggered decline in production, the number of employees has been increasing
• Industrial downturn and unfavourable conditions have dampened the economic outlook for 2012 more than previously expected: Economy will only grow by 1.4 percent in 2012

Demand for Austrian industrial goods has further declined in recent weeks. "Following a decline in incoming orders, Austria's industrial companies have continued to roll back their production. While new jobs are still being created in the sector, inventory build-up, delivery time development and the slower surge in costs are signs for the cooling of the industrial economy," said Bank Austria chief economist Stefan Bruckbauer. The Austrian industry's two-year boom is over now. "The Bank Austria Purchasing Managers' Index dropped to 50.1 points in August, which is the lowest level registered since August 2009," Mr Bruckbauer noted. This is the sixth month in a row that the index has fallen, and it has now reached the growth threshold of 50 points.

"For the second time in a row, Austrian industrial companies scaled back their production output in August. The decline of the output index to 48.3 points indicated that the firms scaled back their production output even faster than in the previous month," said Bank Austria economist Walter Pudschedl. The downtrend in new orders has stabilised in August but there has still been a minus in the order books for the third month in a row. This trend results from a decline in incoming national and international orders. The order backlog of Austria's industrial companies has decreased as a result of a lack of demand in August.

Due to lower demand, Austria's industrial companies have further reduced purchased quantities in August. The development of stock levels also reflects a lack of new orders and the companies' increasing cautiousness. Primary material inventories have hardly changed, while the investment goods sector even reported declining stocks. Due to lower demand, finished goods inventories have piled up in August for the sixth month in a row – and as quickly as only once before since the survey was introduced in 1998. "Despite the noticeable decline in demand, new jobs are still being created at Austrian industrial companies. However, employment growth has slowed down and will soon end in view of the unfavourable conditions," said Mr Pudschedl.

"The noticeable relief of the domestic industrial companies through a slowdown of the purchasing price dynamics has been a positive concomitant of the industrial cooling. Many primary materials such as specific metals and crude oil products were even cheaper than in the previous months," said Mr Bruckbauer. The purchasing price increase has been slowing down the sixth month in a row and has even fallen below the long-term average. Sales prices also increased very moderately in August. Fierce competition and a decline in demand have narrowed the space for price increases. Bank Austria economists believe that the cost increase for Austria's industrial companies have noticeably slowed down as a result of the price trends in August.

By declining towards the growth threshold of 50 points, Bank Austria's most recent Purchasing Managers' Index shows that Austria's industry has stopped expanding in the second half of 2011. Besides, the continuously declining order income and the falling ratio of the index for new orders to inventories have made it clear that the downward trend will not reverse in the months to come. "Following an increase in industrial production of an average 10 percent year-on-year during the first half of 2011, we expect the industry to grow by 8 percent in the full year, regardless of the slowdown. Considering the strong industrial activity during the first half of the year, which has also been reflected in a GDP growth of 4 percent, we have raised our growth forecast for the full year of 2011 from 3.1 to 3.3 percent," said Mr Bruckbauer.

According to Bank Austria economists, growth expectations for 2012 have further deteriorated in recent weeks. "For 2012, we expect Austria's GDP to grow by no more than 1.4 percent. The measures to cope with the debt situation have only diminished the timeframe for the budget consolidation in almost all countries. This development will also have an effect on the growth, in addition to the general feeling of unease among investors and consumers", Mr Bruckbauer said when explaining Bank Austria's adjustment of the GDP forecast for 2012 down from 1.8 percent.

 charts (PDF;  KB)

Enquiries: Bank Austria Economics & Market Analysis Austria
 Walter Pudschedl, Tel.: +43 (0) 50505 - 41957;
 E-mail walter.pudschedl@unicreditgroup.at

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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