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27.04.2012

Bank Austria Purchasing Managers' Index in April: Austrian industry maintains recovery despite tricky conditions

• Bank Austria Purchasing Managers' Index again signals moderate industrial growth in Austria, despite marginal drop to 51.2 points in April
• On the one hand: strong employment growth in Q1; more than 8,000 new jobs created in the sector thanks to expanding production
• On the other: falling orders and dwindling order backlogs suggest a tough few months ahead for industry
• European climate remains challenging; yet growth rate of at least 2 percent expected for industry in 2012

 

Austrian industry continues to grow at a moderate pace but is now coming up against some headwind from Europe. "In April the Bank Austria Purchasing Managers' Index recorded a reading of 51.2, still above the growth threshold of 50 points. However, the indicator has ceded some ground on the previous month and has therefore fallen for the third month in a row", explained Bank Austria's chief economist Stefan Bruckbauer. Austrian industry on its bumpy growth path is showing modest signs of exhaustion at the start of the second quarter of 2012. "On a positive note, the deterioration in order trends is currently being compensated for by an increase in production. This has even led to a continued rise in employment in April. That said, inventory trends point towards less dynamic development of demand in April too", said Bruckbauer, summarising the so-so results of the regular survey carried out by Markit Economics for Bank Austria among Austrian industrial companies.

For the first time this year the demand for the products of Austrian industry has fallen in comparison to the previous month. While the popularity abroad of products "Made in Austria" remains virtually unchanged, the volume of new orders generated within the country has noticeably dropped. "Based on the high order backlog Austrian industry managed to increase its production in April, despite the drop in new orders. Coming in at 52 points, however, the production index is below the previous month's reading and the rate of expansion has slowed", said Bruckbauer.

 

After dipping in the second half of 2011 the production index has now recorded values above the growth threshold for four months in a row. "The expansion in production in April prompted Austrian industrial companies to increase their staff levels too in order to keep abreast of production demands. The employment index has surged to its highest level for ten months", revealed Bank Austria economist Walter Pudschedl. In the Austrian manufacturing industry more than 8,000 new jobs were created in the first quarter of 2012 compared to the previous year. This corresponds to growth of approximately 1.5 percent. According to estimates by the economists at Bank Austria the true extent of the employment growth in the sector is likely to be even higher as the number of temporary workers is not assessed. 

The somewhat confusing economic signals in April are also reflected in inventory trends. Inventories for sale have risen sharply to meet the prevailing demand. Despite the higher purchased quantities though, inventories of primary materials only rose marginally in April due to the expansion in production. "The minimal increase recorded for inventories in purchasing and the moderate adjustment of production in April lead us to conclude that Austrian industrial companies believe the dip in demand observed in April will be but temporary phenomenon, and they predict that the industrial recovery will continue", said Pudschedl.

"The balance in terms of sectoral development is shifting away from the steel industry and car manufacturing towards mechanical engineering and the electronics industry", said Bruckbauer. This means that mechanical engineering and the electronics industry have the best production growth prospects for 2012 with projected figures of +5 and +4 percent. Car manufacturing – which produced the most dynamic growth last year of all the sectors in the Austrian economy – is also set to record growth in 2012, but only of around 3 percent.

Despite the modest decline in the Purchasing Managers' Index in April, the Austrian manufacturing industry appears to be rather robust by international standards and is growing steadily – albeit with ups and downs. In many European countries, including Germany, the Purchasing Managers' Index has now fallen below the growth threshold. This negative European climate coupled with the poor order situation in April makes it clear that Austrian industry will have to navigate some choppy waters ahead in the coming months. After the indifferent developments within manufacturing in the first quarter of 2012, the sector is expected to generate only mild growth towards the summer. "European economic policy is still being challenged to come up with the right blend of expansionary and austerity measures", said Bruckbauer, analysing the current economic situation. In spite of this the economists at Bank Austria expect that Austrian industry will receive more international support in later months of the year, and this will lend it some renewed momentum. In this event, Austrian industry will expand by at least 2 percent and again become the main contributor to Austrian economic growth in 2012. Consequently, the economists at Bank Austria uphold their GDP forecast of 0.8 percent.

 

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.