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Bank Austria Purchasing Managers' Index in November:
Turnaround in sight for industrial activity

  • Strong upwards correction – sitting at 49.3 points, the Bank Austria Purchasing Managers' Index climbs in November to best reading since June
  • Rising orders nudge production up slightly in Austrian industry for the first time since the summer
  • Employment squeeze continues
  • Growing input prices weigh down on corporate earnings
  • Turnaround in industry gets economic recovery in motion – following recession in second half of 2012, modest pick-up expected in the course of 2013
  • Industrial output to grow by 3 percent in 2013, solid pillar of economic growth totalling 0.9 percent after just 0.5 percent in 2012

The downward cycle of Austrian industry has drawn to a close and economic activity has clearly bottomed out. "In November the Bank Austria Purchasing Managers' Index rose sharply, quite unexpectedly. At 49.3 points the indicator has recorded its best reading since June and is only marginally short of the 50-point threshold that signals the start of growth", said Bank Austria chief economist Stefan Bruckbauer. Since February the business position of Austrian industrial companies has continuously worsened, and even gone backwards over the last four months. "The modest growth in new business in November let to a small increase in production output for the first time since the start of the summer. Although both the order backlog and employment still fell in November, the fall was less marked than in October", said Bruckbauer.

Between July and November of this year, Austrian industrial companies scaled their production output back across the board. However, growth in incoming orders in November stabilised production once more. "The tangible improvement in orders at the minute is largely home-grown. Although the contraction in export orders was smaller compared to the previous month, the demand for products 'Made in Austria' still leaves much to be desired", revealed Bank Austria economist Walter Pudschedl. The global economic downturn, especially the ongoing recession in some neighbouring countries of Austria, first and foremost Italy, its second most important trading partner, is hampering Austrian manufacturers. The decline in incoming orders from abroad is the main reason for the order backlog at Austrian companies, which has been thinning for ten months now.

Although the improved order situation led to a slight increase in production, this has not yet been reflected on the labour market. In November, HR capacities in industry were cut again for cost reasons. "Even though the pace of the downsizing has slowed somewhat, jobs have been lost in the sector for roughly half a year now. Nevertheless, throughout the whole of 2012 the number of those employed in industry sits at 583,000 on average, roughly 1.6 percent more than in the previous year", explained Pudschedl. In spite of the stabilisation of industrial activity, there is not expected to be any relief felt yet on the labour market in the coming months. According to the economists at Bank Austria, the unemployment rate in 2013 will rise to 7.3 percent – after sitting at 7.0 percent on average in 2012.

Regardless of the now tangible stability which has returned to Austrian industry, the current price trends highlight the surplus capacities at present, and the fact that demand is very subdued. Input prices crept up once more on account of the higher prices for energy and metals as well as the increase in transport costs; however, the growth soon weakened below the average. Amidst the fierce competition, sales prices remained unchanged on the whole; a slight rise was recorded for consumer goods, contrasted with a fall in the prices of intermediate goods. "Against the current backdrop of weakening demand, companies are clearly not able to fully incorporate the cost increases in their sales prices", analysed Pudschedl. So in order to compensate for the price trends, Austrian businesses are focusing more strongly on stock depletion, which is resulting in longer delivery times on the one hand and a reduction in purchase quantities on the other.

Slower growth in production and incoming orders coupled with a current reading for the Bank Austria Purchasing Managers' Index around the threshold between growth and contraction collectively signal an end to the downward spiral for Austrian industry. Around the turn of the year, Austrian industry is set to find its growth feet again, though the pace of this recovery will be moderate at the outset given the current situation in the international economy. With anticipated growth of 3 percent, industry in the coming year will be the dominant growth driver of the domestic economy. "The turnaround in industry will pass through to the whole economy as well in the coming months. Following the mild recession in the Austrian economy in the second half of 2012, we can expect to see a moderate recovery in the course of 2013 with the return of some stability to Europe. At present we forecast the economy will grow by 0.9 percent", concluded Bruckbauer. While the economists at Bank Austria have therefore scaled their GDP projection for 2013 back slightly given the negative influence of the recession in some neighbouring countries, which has proved to be stronger and longer than originally assumed, they believe that the current Purchasing Managers' Index confirms their expectation of a slight revival in 2013.

 charts (PDF; 100 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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