28.05.2013

Bank Austria Purchasing Managers' Index in May:
Upwards trend takes shape in Austrian industry

  • Bank Austria Purchasing Managers' Index turns the corner in May: modest rise to 48.2 points
  • Growth in new orders leads to increase in production, but employment still contracting
  • Improved situation with costs thanks to falling prices of raw materials
  • Recovery in Austrian industry set for second half of the year: moderate growth of roughly 1 percent in 2013, driven from abroad
  • Brighter industry outlook bolsters economic growth, estimated GDP growth for 2013 now 0.4 percent

Industrial activity in Austria has been showing serious signs of fatigue since the second half of 2012. But now there is some light at the end of the tunnel. "In May, Bank Austria's Purchasing Managers' Index reversed the downwards trend we have seen since the start of the year, rising marginally to 48.2 points. However, the indicator remains below the growth threshold of 50 points, where it has now been for almost a year", explained Bank Austria chief economist Stefan Bruckbauer. The latest survey among Austrian purchasing managers shows much brighter prospects for industrial activity in many segments. "Orders noticeably improved in May, and this resulted in an increase in production. By contrast, the still uncertain outlook for the economy is reflected amongst other things in further job cuts for Austrian industrial companies", said Bruckbauer.

Austrian industry benefited in May from its high international competitiveness, posting more new orders again for the first time in six months. "Freed from the shackles of the Cypriot crisis, sentiment in Europe has stabilised, boosting economic activity. The improved order flow, especially from abroad, was directly reflected in a slight rise in production from Austrian enterprises", revealed Bank Austria economist Walter Pudschedl. For the first time since November of the previous year, the production index rose above the growth threshold to 50.2 points. This means Austrian industry managed to expand production slightly overall in comparison to the previous month.

However, the production growth in May did not have a positive impact on employment trends. "The continuing uncertainty surrounding business trends led to job cuts in industry for the second month in a row. That said, the number of jobs in Austrian industry has remained at the same high level in the last 12 months, sitting at more than 580,000. Consequently, the low employment growth in Austria, which has been in reverse in recent months, is currently being driven by the services sector alone", explained Pudschedl. In light of the sluggish improvement in economic activity, Bank Austria's economists no longer expect manufacturing to make a comeback as a net provider of jobs, at least this year. In 2014, however, industry could become the main driving force on the Austrian job market.

Despite the first glimmers of hope, the current employment trends coupled with another few components of the May survey illustrate the ongoing uncertainty and the difficult overall conditions facing Austrian industrial companies. The order backlog continues to thin while customers are still reluctant to make purchases, which is also reflected in the lower stock levels. Following the demand-induced reduction in prices for some raw materials and primary materials, Austrian industrial companies, especially manufacturers of capital goods, were faced with tangible reductions in input prices in May. The fierce competition but weak demand also triggered a decline, albeit small, in sales prices for the fourth month in a row. "The sharp fall in purchasing prices compared with the moderate decline for sales prices brought about an improvement in the cost and earnings position of industry in May. Price trends have been alleviating the pressure on Austrian companies since the start of 2013", added Pudschedl.

"In keeping with the Bank Austria Purchasing Managers' Index, industrial output in Austria has fallen slightly in every month since the start of 2013. In May, however, the first signs of light at the end of the tunnel began to appear, which in our view points toward an imminent recovery of Austrian industry followed by the economy as a whole", said Bruckbauer. Alongside the improved order flow and the first increase in production in 2013, as demonstrated in the current survey conducted among Austrian purchasing managers, the much improved order and inventory trends as one of the most reliable indicators of future development suggest we are set to experience an upwards trend in the coming months. Additionally, the situation on the international economy is also looking up. The purchasing managers' index in the eurozone rose in May for the second month in a row to 47.8 points, while the latest rise in the German IFO business climate index sends a very promising signal to Austrian industry. With support from abroad, Austrian industry in the coming months will be able to pick up pace. Following the modest increase of roughly 0.5 percent in annual terms during the first quarter, we expect growth in industrial production for 2013 as a whole of at least 1 percent.

"Trends were weak at the start of the year and economic activity has remained sluggish in the second quarter of 2013 too, but the outlook is bright and the chances are that the Austrian economy will enjoy a late economic spring in the second half of the year based on a recovery in industry, thereby making up for some of the weaker development in recent months. Nonetheless, we have lowered our GDP forecast for 2013 from 0.9 to 0.4 percent", concluded Bruckbauer. Bank Austria’s economists expect an increase in economic output in Austria for 2014 of 1.6 percent in real terms.

 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.