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Bank Austria Purchasing Managers' Index in October:
Industrial activity remains weak for now

  • Bank Austria Purchasing Managers' Index falls again in October – but decline only minimal this time, down 0.3 points to 44.8 points
  • Falling orders trigger cutbacks in production and job losses once more
  • Earnings of companies under pressure from sharp rise in input prices
  • Recovery in industry expected no earlier than 2013: growth of 3 percent on horizon
  • Outlooks for federal provinces: industrial growth in Upper Austria, Tyrol, Vorarlberg and in Vienna will come in above the national figure of 1 percent in 2012

The unfavourable international conditions continue to weigh down on Austrian industrial activity. "In October the Bank Austria Purchasing Managers' Index lost ground once again and is currently at 44.8 points. This means growth is falling fast, at a rate not seen since mid-2009. That said, following the continuous and sometimes rapid drop in growth since the beginning of the year, this minimal fall of just 0.3 points compared to the previous month does suggest the downward trend is starting to level off", said Bank Austria chief economist Stefan Bruckbauer. The indicator, which summarises the results of a survey on the economic position of Austrian industry in one number, has now revealed a contraction in the manufacturing sector for the fourth month in a row. "The declines in orders were substantial in October, meaning that not only production was scaled back but employment too. What is more, the sharp increases in input prices exerted pressure on earnings at Austrian industrial companies", explained Bruckbauer, outlining the current situation industry finds itself in.

The production volume component has now dropped to just 43 points. "Austrian industrial companies reduced their production output in October at a rate not seen in almost three and a half years. The extremely negative trends in order intake over the last few months were instrumental in this. Demand both from abroad and from Austrian clients declined sharply. At the very least the trend has not got worse", said Bank Austria economist Walter Pudschedl, identifying a light at the end of the tunnel in the current order trends. In recent weeks, fewer orders have been placed from countries in the eurozone in particular. The recession in key sales markets for Austrian manufacturers – first and foremost in Italy, the second most important trading partner for Austria – is really making itself felt. The order backlogs – which have been contracting steadily since the start of the year – fell strongly in October once again.

The severe cutbacks in production caused by the diminishing flow of new orders has triggered further adjustments in personnel at Austrian industrial companies. "The pace of job losses picked up in October again, to a rate last seen in December 2009. However, the majority of Austrian companies managed to keep their employment levels stable. In spite of the generally poor overall climate, jobs were actually created in some sectors, like many of the metal industries, mechanical engineering and the pharmaceutical industry for example", added Pudschedl. The inauspicious order situation coupled with the consistent implementation of programmes to reduce inventories means that a return to employment growth in the sector is not yet in sight. However, to keep storage costs down for primary materials, purchase quantities were significantly lowered in October once more, for the sixth month in a row. The moderate decline in inventories of finished goods even resulted in an increase in delivery times, for the first time in five months.

"The current price trends are also putting earnings at Austrian industrial companies under pressure. In October, input prices rose much faster than sales prices", revealed Pudschedl. The pressure on prices from customers and the growing competition meant that the potential for raising sales prices was limited. By contrast, prices for primary materials and raw materials both increased. The sharp rise in prices was caused principally by gas, electricity, various chemicals and plastics, but also some basic foodstuffs.

The latest Purchasing Managers' Index from Bank Austria reveals that the recession in Austrian industry is continuing. Nevertheless, the situation is now starting to stabilise. "It appears that industrial activity will bottom out just before the end of 2012. Although the negative industrial sentiment from recent months has also been strongly reflected in the real figures, for 2012 we still expect to see modest growth in manufacturing of up to 1 percent", said Bruckbauer. Depending on the sectoral make-up, we are likely to see above-average growth in manufacturing this year in Upper Austria, Tyrol and Vorarlberg, as well as in Vienna – the latter thanks amongst other things to the strong expansion of the pharmaceutical industry. For 2013 the economists at Bank Austria have outlined an optimistic scenario for Austrian industry comprising growth of up to 3 percent. Growth drivers for manufacturing in the coming year will be mechanical engineering and metal-ware production as well as the electronics industry. This development will be supported by the slow return of stability to the eurozone and therefore the revival of demand from Europe.

 charts (PDF; 40 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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