Bank Austria Purchasing Managers' Index for January:
Significant turnaround for Austrian industry
- Bank Austria Purchasing Managers' Index reaches growth territory for the first time in six months, at 51.8 points
- Rising demand leads to a marked gain in order intake and triggers growth in order backlogs; production increasing again
- Price and inventory trends point to a lasting reversal in industry
- Outlook for 2012: Boost for Austria's economy thanks to positive leading indicators – Austrian economy will gradually start to expand again
The positive signs of a burgeoning stabilisation of the slowdown in industrial activity seen last month were more than confirmed in the most recent survey of Austria's purchasing managers. "The Bank Austria Purchasing Managers' Index posted a gain for the second month in a row in January, which was not entirely unexpected, although the extent of the increase did come as a surprise. For the first time in six months, the indicator is back above the 50-point threshold which marks growth compared to the previous month, with a reading of 51.8 points," said Bank Austria's chief economist Stefan Bruckbauer, summing up the encouraging results.
Austria's industry appears to be returning to a sustainable path of growth more quickly than was originally expected. "The current survey points to the start of a turnaround in domestic goods manufacturing. The improved order situation is leading to growth in order backlogs, and production has picked up again. Rising prices, inventory restocking and longer delivery times amidst stable employment conditions are accompanying the budding turnaround in the industrial sector," added Bruckbauer.
"Austrian industrial companies increased their production output compared to the previous month for the first time since June of last year. This came as a result of the marked increase in demand, particularly from Austria itself this time around, which led to significant increases in order intake in January," said Bank Austria economist Walter Pudschedl. But the slide in export orders seen in recent months has also come to an end. The considerable increase in orders also required higher purchasing volumes than in the previous month for the first time in half a year. Although production capacity was stretched thin due the increased demand for products from Austria's industrial sector, order backlogs grew in January.
According to Bank Austria's economists, a number of other details of the survey support the assumption that the crossing of the 50-point threshold by the Bank Austria Purchasing Managers' Index in January indicates that a reversal of the downward trend seen in recent months has already started.
On the one hand, the demand-driven price drop in some commodities and input materials that was reflected in falling purchasing prices in recent months came to an end in January. "Purchasing prices are clearly on the rise again, which has also led to higher selling prices. However, domestic companies were not able to fully pass the rising costs on to their customers," said Pudschedl. The intense competition in the current fragile economy will present major challenges for Austrian industry in the coming months when it comes to maintaining sufficient earnings.
On the other hand, the current inventory trends are also worth noting. Despite concentrated cost management efforts, Austrian industrial companies have significantly expanded input material inventories in order to be prepared for sustained production capacity utilisation. Although there was a considerable increase in production, the pace of growth in sales stock slowed dramatically compared to the previous month. "If you calculate the ratio between the development of new orders and the current inventory trends, you see a marked increase to a value above one, which has not been the case since the spring of 2011. Thus, this indicator, which has proven very reliable in the past, points to a consolidation of the reversal in industry in the coming months," explained Bruckbauer. In fact, this indicator has not increased as dramatically as it did this January in almost three years.
The Austrian economy is once again on the rise. The positive leading indicators fit well with the encouraging data coming from other countries in recent days, such as the increase in the purchasing manager's index for the Eurozone and the German Ifo Business Climate index. "The most recent survey results and data releases in Austria confirm my expectations that the European economy – and the Austrian economy along with it – will perform better in 2012 than many people expect in a difficult environment characterised by a lack of trust," said Bruckbauer. Following the stagnation seen at the end of last year, the Austrian economy will gradually start to expand again in the first quarter of 2012 and will benefit from a more robust global economy over the course of the rest of the year. "We still expect economic growth to come in at 0.8 per cent. Based on the latest leading indicators, I see a recession in Austria as even more unlikely than before," concluded Bruckbauer. Over the medium term, however, factors such as budget reform will dampen the acceleration going forward. In addition, setbacks in the Eurozone cannot be ruled out based on the events of the past two years.
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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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