Bank Austria Purchasing Managers' Index for February:
Austrian industry still taking a breather

• Bank Austria Purchasing Managers' Index sinks slightly to 48.3 points in February
• Persistently subdued order situation puts a damper on production
• Signs of a stabilisation emerging in employment
• Reduced cost pressure as a result of current price trends
• Delayed spring awakening in industry may provide too little support for a GDP increase in the first quarter of 2013
• But optimism remains that industry will grow by 3 per cent in 2013

Amidst the difficult conditions at the moment, Austrian industry is taking time to pick up momentum. "After making it past the economic low in the fourth quarter of 2012, the domestic production sector is taking a longer breather along its path to recovery at the beginning of 2013. The improvement in January was followed in February by a slight downward correction of the Bank Austria Purchasing Managers' Index to its current level of 48.3 points," said Stefan Bruckbauer, chief economist at Bank Austria, adding, "Austrian industry has still not managed to escape from the level of stagnating production where it has been for two years." For four months, the indicator has been just under the growth threshold of 50 points – so far, there have only been tentative signs of a breakthrough. "The order situation in February was very subdued again. This had more of a negative impact on production output than in the previous month. Orders on hand stabilised, and job cuts slowed down," said Bruckbauer, discussing some of the details of the monthly survey of Austrian purchasing managers.

The current lack of strong foreign demand is putting a damper on the spring awakening of Austrian industry. The recession in Europe and particularly in some of Austria's important export markets is easing at a very slow pace, which is exerting pressure on export order volumes. As a result, demand for domestic industrial products fell somewhat more dramatically overall than in the previous month. "Too few new orders from Austria and especially from abroad are having a noticeable impact on the current development of production output, which declined somewhat more sharply again in February," said Bank Austria economist Walter Pudschedl. However, the purchasing volumes remained stable and the decline in the level of orders on hand was much smaller than in the previous month.

Austrian industrial companies continued to adjust capacities to meet the current subdued demand situation. "The employment index of the Bank Austria Purchasing Managers' Index has shown job cuts in the sector, mainly affecting leased personnel, since July 2012. But in February, the pace slowed considerably, which can cautiously be seen as the beginning of a stabilisation in the employment trend as a result of easing economic concerns," said Pudschedl. However, industrial activity is currently still too weak to signal a trend reversal on the labour market in the coming months.

Austrian companies are reacting to high cost pressure once again by reducing existing stocks on hand. This affected both input material inventories and stocks of finished goods in February, the latter at a much faster pace. The latest price trends, however, are favourable in this regard for domestic companies. While purchasing prices declined for the first time since August 2012 due to moderate global demand and the stronger euro, selling prices rose even more sharply in February than in the previous month.

Austrian production companies made it out of the economic slump around the end of 2012, but there are still no signs of a marked improvement in business. For months now, the Bank Austria Purchasing Managers' Index has been sending at least mixed signals that industry will awaken from its hibernation. However, there was still no clear upward trend visible in February. In light of the rising indicators all over Europe and especially in Germany, including the latest sharp uptick in the Ifo Index, and the improvement in the confidence indicators in Austria as well, the economists at Bank Austria remain optimistic. "We expect that after a somewhat extended breather by Austrian industry, a clear upward movement will set in, and we are therefore sticking to our forecast of 3 per cent growth for Austrian goods manufacturers in 2013," said Bruckbauer in summary. This year will therefore bring an acceleration following two years of stagnation, and Austrian industry may exceed the production level from 2008 for the first time. However, the upswing in industrial activity will be delayed somewhat towards the second quarter of 2013. Since the sector will barely provide any support for growth in the first quarter, there is a greater risk that, following the 0.2 per cent decline compared to the previous period in the final quarter of 2012, the Austrian economy as a whole will still not return to growth at the beginning of 2013.

 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.