Bank Austria Purchasing Managers' Index in April:
Industrial growth tails off
- Sharp fall in the Bank Austria Purchasing Managers' Index due to a slowdown in orders
- High purchase prices caused by rising commodity prices depress earnings
- Employment growth sustained thanks to higher production output in recent months
- Industry remains the number 1 growth driver for the Austrian economy: 6 percent growth rate leads to 2.8 percent rise in GDP
After an excellent start to 2011, Austrian industry has now lost momentum. "The sharp drop in the Bank Austria Purchasing Managers' Index in April to 57 points shows that Austrian industrial companies were growing less dynamically at the start of the second quarter than had been the case at the start of the year. In the last three months, the index showed unusually strong sectoral growth, with figures above the 60 mark," said Stefan Bruckbauer, chief economist of Bank Austria. In April, results were weaker than in the previous month in all the areas covered by the monthly survey of purchasing managers in Austria, carried out by Markit Economics on behalf of the Bank Austria. "The current situation is characterised by markedly slower growth in new orders, especially from abroad, subdued dynamics in order book trends, purchase quantities and finally in production. The continued strain caused by current price trends is hitting Austrian companies even harder," according to Bruckbauer.
The slowdown in new business that set in last month became even more pronounced in April. As a result, the volume of orders on hand is growing more slowly, although the upward trend is being sustained. "There has been a perceptible decline in both domestic and foreign demand. Austrian industrial companies responded by curbing the increase in production output at the beginning of the second quarter of 2011," said Bruckbauer, explaining the most important factor behind the decline in the Bank Austria Purchasing Managers' Index in April. The sub-index for production output has now fallen from 61.2 points in March to 57.5 points in April but this means it is still around the very satisfactory level recorded in December last year.
While the survey indicators point to a marked slowdown in what has been an unusually fast pace of growth shown by Austrian industry, this has barely had any effect on the continued expansion of employment in the sector. "In view of the substantial increase in production in recent months, the rate of capacity utilisation in Austrian industry is now well above the long-term average, necessitating a further adjustment in personnel capacities. As a result, industry will play a key role in easing the situation on the Austrian labour market and will make a major contribution to reducing the unemployment rate from 6.9 percent in the previous year to an average of 6.6 percent over 2011 as a whole", said Walter Pudschedl, economist at Bank Austria. In the highly industrialised provinces, such as Upper Austria and Vorarlberg, the unemployment rate in 2011 will be markedly below the Austrian average.
After easing off slightly in March, purchasing prices in April once again developed to the detriment of Austrian production companies. "Due to the continuing increase in commodity prices, purchasing prices rose sharply again in April, albeit more slowly than in the past. At the same time, in the face of stiff competition, manufacturers were no longer as able to pass on this increase in production costs in the form of higher sales prices, which again put pressure on earnings in April as a whole," according to Pudschedl. Rising demand for raw materials and continuing uncertainty – also as a result of the crises in northern Africa – mean there is no significant decline in raw materials prices in sight.
The current Bank Austria Purchasing Managers' Index clearly shows that after the extremely successful start to 2011, Austrian industry has probably left the most dynamic growth phase behind. All sub-indices are pointing downwards. The new orders-inventories balance deteriorated significantly in April. At just above 1, this factor has reached its lowest level since May 2009, when the turnaround came following the production slump as a result of the global economic slowdown. This indicator for industrial development in the next three to six months, which in the past has proved extremely reliable, underscores that Austrian industry is now entering much more sluggish waters, but continues to expand vigorously. "After an estimated two-digit rise in production in the first quarter of 2011, we anticipate that industrial growth in 2011 will total 6 percent, making industry the most important driver of the continued economic recovery in 2011 and boosting gross domestic product in 2011 by 2.8 percent. Despite the significantly increased risks to growth in recent weeks, the Austrian economy remains firmly on the path to recovery thanks to the strength of its internationally competitive industrial sector.
charts (PDF; 88 KB)
Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel. 05 05 05 EXT 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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