Bank Austria Purchasing Managers' Index in December:
Slowdown in the contraction of Austrian industry

  • The Bank Austria Purchasing Managers’ Index is rising again for the first time in ten months. The current reading is 1.4 points higher but still under the growth threshold.
  • Stable order situation slows contraction in manufacturing output and supports ongoing job growth.
  • Declining purchasing prices are having a positive effect on the earnings situation; industry growth of about 7 percent for 2011 as a whole
  • 2012: positive indicators substantiate expected stabilization; 3 percent growth in manufacturing output within reach

The contraction in the Austrian industrial sector that began in the spring of 2011 came to a stop at the end of year. "The Bank Austria Purchasing Managers’ Index in December gained ground over the previous month for the first time in ten months and has now reached 49 points," explained Bank Austria chief economist Stefan Bruckbauer. This indicator reflects in a single figure the outcome of the monthly survey of Austrian purchasing managers on their sentiment toward domestic industry. Although this was the fourth consecutive month in which the indicator fell short of the growth threshold of 50 points, this latest increase suggests that the situation is stabilizing. "The rapid decline has come to a stop along a broad front," said Bruckbauer in his analysis. "New orders, quantities purchased, the order backlog and manufacturing output all declined at a slower pace but job growth has accelerated."

With customers still showing restraint about investment, Austrian industrial companies are facing yet another slump in new orders. The lack of new orders and follow-up orders was especially evident among manufacturers of intermediate goods. "The decline in orders from abroad was particularly sharp. Despite this second consecutive improvement in the index, the drops in orders in December were substantial once again," said Bruckbauer. The unfavorable outlook for economic activities also caused the sixth decline in a row in monthly manufacturing output, albeit quite a marginal decline this time around.

In the current business environment, companies have again reduced the quantities purchased although not as drastically as in previous months. "Inventory trends also reflect the still subdued situation on the demand side. December has seen a continuation of the reduction in stocks of primary materials and growth in sales stocks in recent months," said Bank Austria economist Walter Pudschedl.

In spite of declines in orders and output, Austrian industry created new jobs again. The pace of job growth in this sector even accelerated in December. This indicates that companies are viewing the current economic slump as temporary and preparing for the upcoming recovery by building up new capacities, which are justified by the development of new products," said Pudschedl, summarizing the conclusions he has drawn from the current figures. The industrial sector has been the job machine of the Austrian economy since the fall of 2009. For 2011 as a whole, the number of jobs in domestic industry increased by about 10,000 or 1.8 percent to an average of more than 573,000.

Austrian industrial companies saw purchasing prices drop noticeably in December owing to a demand-induced drop in the prices of several raw materials and primary materials, including metals and plastics. Average sales prices, for their part, rose slightly again for the first time in three months but nearly 90 percent of the businesses surveyed reported no change in sales prices over the month before. The gap between purchasing prices and sales prices widened in December for the first time since mid-2009. "In light of dwindling demand, the extent to which domestic industrial companies will be able to pass higher costs onto customers will be limited in the future. That will have lasting negative consequences on the costs and earnings situation next year," Pudschedl noted.

All components of the Bank Austria Purchasing Managers’ Index in December showed a definite slowdown in the decline of domestic industry. However, the current upward trend for the overall indicator does not yet indicate a final reversal. The available data at least substantiates the expected onset of stabilization in industrial activities. The last two months have seen a slight improvement particularly in the correlation between the order and inventory trends. This figure has always been a reliable indicator for future short-term development so that no rapid crash is likely in the months ahead. "The latest survey among domestic industrial companies substantiates our expectations that the sharp downward trend in recent months in industry was only a temporary phenomenon and that an economic collapse of the kind we experienced in the fall of 2008 will not recur. In fact, Austrian industry appears merely to be waiting to resume the robust upward trend of recent months under stable basic conditions. An indispensable requirement for a sustained reversal of the trend in industry is therefore the assurance in the economy of a permanent solution to the acute euro crisis," said Bruckbauer.

After a rise of 8.4 percent in the first ten months of 2011, industrial growth is expected by Bank Austria economists to reach about 7 percent for the year as a whole. That means the material goods industry will account for more than 40 percent of total economic growth of 3.3 percent in 2011 even though it accounts for only 20 percent of the net domestic product. Growth in industrial output of about 3 percent is within reach for 2012 if hindering factors are eliminated. That means industry will be able to contribute a greater than average amount to the growth of the Austrian economy of 0.8 percent again next year.

 charts (PDF; 88 KB)

Inquiries:  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 growth or contraction signaled. This press release contains the original data from the monthly survey of purchasing managers at 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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