Bank Austria Purchasing Managers' Index in March:
Austrian industry running increasingly smoothly
- Bank Austria Purchasing Managers' Index signals growth in March for third time in a row with 51.5 points – slight dip in pace of expansion
- Boost from abroad: export orders rise strongly again and support higher Austrian output
- Development of orders has beneficial impact on labour market: employment grows in industry again for the first time this year
- Industry has potential: positive surprise still possible despite tight earnings situation caused by high commodity prices
While the figures supplied by European industry over the early months of this year were very much a mixed bag, the recovery of Austrian industry, by contrast, has proved to be rather stable. "The Bank Austria Purchasing Managers' Index fell slightly in March in comparison to the previous month. However, with its current reading of 51.5 points it is still clearly above the growth threshold of 50 points", explained Bank Austria's chief economist Stefan Bruckbauer. After dipping slightly around the end of 2011, the Bank Austria Purchasing Managers' Index has now signalled expansion in industry for the third month in a row. "Thanks to the encouraging ongoing trend in orders, especially from abroad, production grew strongly in March, and this was coupled by an increase in employment too. Input prices rose sharply once more, which enabled cost-efficient inventory management", said Bruckbauer, summarising the main findings of the regular survey conducted among Austrian industrial companies.
Orders improved in the course of March, albeit at a slightly lower rate than seen in previous months. This was supported first and foremost by stronger impulses from abroad. "Export orders have been rising steadily again for a few months now. In order to meet the greater demand for products ’Made in Austria’, Austrian industrial companies had to sharply increase their production output in March for the third month in a row", explained Bruckbauer.
The sentiment among Austrian industrial companies has gradually improved in recent months from its nadir in late autumn. Having said that, businesses continue to be extremely prudent in view of the overall climate prevailing throughout Europe. We are now seeing greater confidence in a stable recovery in the sector. Austrian industrial companies have also begun to take on new staff again. "Employment in industry rose in March for the first time in 2012. The dynamic increase in production in previous months, the steady flow of orders and the reassuringly high order backlog have enabled companies to adopt a more offensive approach on the labour market", said Bank Austria economist Walter Pudschedl, talking about the positive development of Austrian industry. In light of the growing industrial economic activity, the chances are that we could see a trend reversal on the labour market before the summer, resulting in a fall in the unemployment rate in the second half of 2012 which has been trending upwards in recent months. All told, the economists of Bank Austria expect to see an average jobless rate in Austria of 6.9 percent for 2012, which is marginally above the 6.7 percent figure from the previous year.
However, the robust increase in commodity prices means that Austrian industrial companies are once again confronted with strong increases in input prices. "Under current market conditions, Austrian producers are not able to pass all of the much higher costs for primary materials through into their sales prices. Price trends proved to be a significant drag on earnings in March", revealed Pudschedl. To counter the unfavourable trends in prices, Austrian industry is currently adopting a far more cost-conscious approach with regard to inventories. In view of the higher commodity prices, Austrian manufacturers have deliberately kept purchase quantities low in March, which has resulted in the most significant depletion of primary material stocks for over two years. Sales inventories also diminished somewhat in March", said Pudschedl. The stronger focus on costs has meant that delivery times increased in March amidst continued growth in demand.
After stumbling a little towards the end of the previous year, industrial economic activity in Austria found new momentum again at the beginning of 2012. "The positive development in the latest Purchasing Managers' Index of Bank Austria on a broad basis shows that the engine of Austrian industry is starting to run ever more smoothly. That said, the momentum dropped slightly in March and the tempo still remains low for the time being. The ratio of "new orders relative to inventories" suggests that the industrial recovery will continue to stabilise in the coming months," said Bruckbauer. For three months now this ratio has been above one – and rising. This sends a clear signal that given existing inventory capacities the strength of demand will likely result in additional production growth month-on-month. "Our forecast of industrial growth amounting to an average of two percent in 2012 seems increasingly stable from the bottom. As the situation surrounding the European sovereign debt problem continues to calm down and we receive more encouraging data from overseas, it is increasingly likely that we are in for a positive surprise with economic activity. For the time being we leave our growth forecast for the Austrian economy as a whole at 0.8 percent", said Bruckbauer in conclusion.
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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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