Bank Austria Purchasing Managers' Index in September:
Orders down for Austrian industry
- Bank Austria's Purchasing Managers' Index drops to just 45.1 points in September, signalling a tangible downturn in industrial activity
- Sharpest decline in orders since the middle of 2009 results in a significant reduction in production – job losses in industry pick up pace in September
- Contraction in industry weakens overall economy: modest decline in GDP likely for the third quarter
- Renewed impetus from foundations laid to resolve the euro crisis not expected before the turn of the year
- Optimistic outlook: boosting production by roughly 3 percent, industry will again be a crucial pillar of Austrian economic development in 2013.
The slowdown of Austrian industrial activity gained momentum again at the start of the autumn. "In September the Bank Austria Purchasing Managers' Index sank to 45.1 points, its lowest reading since the middle of 2009. The noticeable downward trend in orders played a crucial role in this development, which led to a reduction in production output and a fall in employment", explained Stefan Bruckbauer, chief economist at Bank Austria. Since July of this year the indicator has been firmly camped below the growth threshold, signalling a contraction of industrial output. "Industrial production shrank from July to September 2012 according to the survey data of Bank Austria's Purchasing Managers' Index. Influenced strongly by the manufacturing sector, GDP could even drop slightly in the third quarter", explained Bruckbauer. After the very restrained growth figures over the summer, Austria was forced to bow even more to the effects of recessions in some countries of the eurozone at the start of the autumn.
General conditions for Austrian industry have become more troublesome recently, as demonstrated by the noticeable worsening of order trends in September. "Demand for products "made in Austria" has not fallen as sharply since the spring of 2009. Orders from abroad in particular suffered huge falls, to the extent that Austrian industrial companies scaled their production output back", said Bank Austria economist Walter Pudschedl. The production index dropped to 46.2 points, reaching its lowest reading for more than two years.
Austrian industry responded to the changed manufacturing climate by making further adjustments to personnel. "Jobs were lost in industry in September for the fourth month in a row. Moreover, the pace of this downsizing actually increased as well", noted Pudschedl. Due to the continued fall in the order backlog and the ever shorter delivery times we do not anticipate any return to employment growth in the sector for the time being.
Irrespective of the lukewarm industrial activity, prices are rising slightly once more. First and foremost it was the weak euro that pushed the input prices for commodities back up for the first time in four months, especially crude oil. "In September we registered not only an increase in input prices but also in sales prices. Companies largely succeeded in passing on the higher costs, thereby keeping earnings stable", said Pudschedl.
The higher prices support the assumption that the cool-down in industrial activity has already bottomed out with the current decline in the Bank Austria Purchasing Managers' Index. In spite of the continued reduction in inventories, the quotient calculated from the index for new orders and inventories fell slightly given the sharper drop in orders, but it still remains just under the mean threshold. This is a very reliable leading indicator for the future development of the Austrian economy, which means we can expect very subdued development in manufacturing in the coming months. After seven complete months of data this year, industrial production has risen by an average of just 0.2 percent in comparison to the previous year. The unfavourable trends towards the end of 2011 mean that industry could still generate growth of up to 1 percent throughout 2012 as a whole – in spite of the weak momentum at present. "We believe the foundations are now being laid for a successful resolution to the euro crisis, and notwithstanding any volatility we assume the markets will steadily quieten down. This is why we are more optimistic again about the prospects for industry in the coming year. We predict that industrial output will grow by approximately 3 percent in 2013, with the sector becoming an extremely important pillar supporting economic growth as a whole of 1.2 percent", said Bruckbauer, before emphasising, in conclusion: "It will take a few months though until the progress in resolving the euro crisis is also reflected in an improvement of conditions in the real economy."
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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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