Bank Austria Purchasing Managers' Index for September:
Austrian industry trending downwards
- Bank Austria Purchasing Managers' Index falls to 48.7 points in September, putting it below the growth threshold of 50 points for the first time in two years
- Declining demand for Austrian industrial products curtails production output for the third month in a row
- Employment growth comes to a standstill in September after 18 months
- Thanks to a strong first half of the year, however, industrial growth is still expected to come in at 7 per cent for 2011 – the pace of growth will decline by half in 2012
Industrial activity in Austria has slowed dramatically in recent weeks. "For the first time in two years, the Bank Austria Purchasing Managers' Index has fallen below the neutral growth threshold of 50 points, coming in at 48.7 points in September," said Stefan Bruckbauer, Bank Austria's chief economist. The downward trend in the production sector is now spreading across a broad front. "Austrian industrial companies are confronted with a decline in new orders, a decrease in orders on hand and production output, and for the first time a reduction in employment. The upward trend in prices has slowed considerably, and inventories are shrinking again," reported Bruckbauer, summing up the detailed results of the monthly survey of purchasing managers at Austrian industrial companies.
Growing economic concerns have had a noticeably negative impact on demand for Austrian industrial products. The decline in new orders that has persisted for the past four months even accelerated in September. In particular, foreign orders have fallen significantly. "In an increasingly uncertain economic environment, companies have reduced their production output for the third month in a row as a result of the growing lack of new and follow-up orders. The decline in September was the strongest we've seen since June 2009," said Walter Pudschedl, an economist at Bank Austria.
The decline in order intake, the decrease in the level of orders on hand and the lower production capacity utilisation have made staff cutbacks necessary. "The creation of jobs over the past 18 months, which gave the sector roughly 13,000 new employees – an increase of over 2 per cent – came to an end at the beginning of the autumn. In September, Austrian industrial companies even had to lay off employees again for the first time since the beginning of 2010," said Pudschedl.
Due to the decline in production requirements and efforts to lower inventory costs, the purchasing volume fell for the third month in a row in September. The supply of primary materials also declined as a result. For the first time in six months, the stocks of finished goods also decreased. "In line with the falling demand for primary and raw materials, the increase in purchasing prices also slowed considerably in September. However, due to weaker demand for their products, Austrian companies were unable to fully pass the cost increases on in their selling prices. The cost situation for Austrian industrial companies continues to worsen, but the increase in costs in September was the lowest in over two years," said Bruckbauer.
Following the stagnation in August, the current survey of Austrian industrial companies indicates that, for the first time in nearly two years, Austrian industry will shrink in September. All of the sub-indices are pointing downward. The downturn is not just occurring across a wide spectrum, but has also sped up compared to the previous month. At the same time, the current ratio of order to inventory trends – a reliable indicator of development in the coming months – shows a stabilisation in the pace of the decline. In annual comparison, however, we can expect production increases until the turn of 2011/2012, although the pace of growth will be considerably lower.
"Despite a production increase of over 9 per cent from January to July, we have lowered our growth expectations for 2011 as a whole from 8 to 7 per cent due to the unexpectedly strong decline in industrial growth in recent months," said Bruckbauer. According to Bank Austria's economists, Austrian industry will lack new growth stimulus far beyond the turn of the year. More robust global demand will lend strong support to Austrian industry again in the later part of 2012. "A noticeably lower rate of growth is expected for Austrian industry in 2012. The pace of growth will be about half of what it is in 2011," said Bruckbauer, concluding his remarks about the medium-term outlook for the Austrian production sector.
charts (PDF; 91 KB)
Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 50505 - 41957;
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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