Bank Austria Purchasing Managers' Index for January:
Austria's industry edges towards economic recovery

  • Bank Austria Purchasing Managers' Index for January up 0.5 points to 48.6
  • Moderate improvement in orders helps to offset the decline in production output
  • Stronger increases in output prices compared to input prices is resulting in better earnings
  • Stronger job cuts in industry
  • Industry should return to growth in the first quarter of 2013 – industrial growth of 3 per cent is projected for 2013 as a whole

Austrian industry continues to bounce back, as the economic slowdown gradually fades away. "The Bank Austria Purchasing Managers' Index improved slightly in January. Compared to the previous month, the indicator has risen by one half a point to a level of 48.6, slowly bringing it back closer to the 50-point mark, which signals growth," explained Stefan Bruckbauer, chief economist at Bank Austria. Thus, while Austrian industry has not been able to completely overcome the mild slowdown in activity seen in recent months, the progress towards recovery in the production sector is gaining momentum. "In term of orders, the situation is beginning to improve, and as a result hardly any decline was registered in production in January. Furthermore, rising output prices point to more stable demand conditions, whereas employment – as an indicator which tends to lag behind the business cycle – deteriorated again," noted Bruckbauer, discussing some of the details from monthly survey of Austrian purchasing managers.

At present, production output is marginally lower than in the previous month, but at 49.5 points this indicator has almost reached the neutral mark. "The slight improvement in the situation regarding orders was supportive for industrial performance in January, even though another decline was recorded in new business. This is the tenth month in row with a decline in demand for Austrian products," summarised Bank Austria economist Walter Pudschedl. The pace of this decline, however, has now stabilised.

"The current trends in price developments provide some information on the fledgling recovery in industrial activity: for example, the increase in input prices has slowed. In January, output prices were increased sharply, as it was possible to pass on the rise in the prices of raw materials, thanks to suitable customer demand," explained Pudschedl. For the first time since the summer, price increases in sales were higher than those in purchasing, which has contributed to an improvement in firms' earning performance.

Capacities continue to be adjusted to the demand conditions, which have been difficult since the summer of last year. As backlogs of work in January fell short of the previous month's level, there was further reduction in stocks of purchases, based on cost considerations. "Staff levels were cut back yet again in January. For the eight month in a row, Austrian industry shed jobs, and the pace of this job loss was faster than it had been anytime since the end of the crisis-stricken year in 2009," said Pudschedl. Despite the decline in the second half of the year, for 2012 as a whole the number of employed in manufacturing rose by 1.7 per cent, or about 10,000 persons, compared to the previous year, for an average figure of 583,000. As a result, job growth in the sector was stronger than in the overall economy. Austrian industry faces a difficult path to overcoming the economic slowdown, and consequently the downward trend in employment will probably only be reversed towards the end of 2013.

Although Austria's industry did not really gain significant momentum in January, the results of the survey of Austrian purchasing managers indicate that conditions are improving. The ratio between orders and inventories trends – the most reliable indicator of development in the coming months – points to a moderate upward trend in industry for the coming three months. During the first quarter of 2013, industry will return to expansion, and accordingly the overall economy will see growth again, following the expected mild contraction in GDP in the final quarter of 2012. "For 2013 as a whole, we continue to expect a modest uptrend in business activity in the industrial sector, supported by a recovery at the international level, which will provide fresh impetus for demand for Austrian-made goods. We stick with our forecast that Austrian industry will grow at a rate of 3 per cent and feel that the latest leading indicators from abroad are an increasingly clear confirmation of this prognosis," noted Bruckbauer optimistically.

 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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