27.06.2013

Bank Austria Purchasing Managers' Index in June:
Austrian industry: growth in order signals improvement in the second half of the year after a weak first half

  • Bank Austria Purchasing Managers’ Index continues to stabilise: June saw a rise of 0.1 point to 48.3 points
  • Uneven production performance, but order flow continues to improve
  • Slight slowing of the decline in employment
  • Slowly, but surely: recovery in the second half of the year thanks to a more favourable export environment generates industrial growth of one per cent in 2013 – a four per cent increase in production in 2014
  • Industry also the driver of economic recovery in Austria in 2014 – GDP growth set to increase from 0.4 to 1.6 per cent in the coming year

Austrian industry is only slowly emerging from the economic trough. The monthly survey of Austrian purchasing managers currently points to a stabilising business environment in the sector. "In June, Bank Austria's Purchasing Managers' Index recorded a small increase, thus continuing the previous month's upward trend. Despite an increase of 0.1 point, the indicator's current value of 48.3 remains below the growth threshold of 50 points," said Bank Austria's chief economist, Stefan Bruckbauer. Although Bank Austria's Purchasing Managers' Index has failed to produce a reading above the growth threshold for a whole year now, it has at least got past the low point recorded at the end of the first quarter of 2013. Since then, steady progress towards economic recovery has been observed. "Order flow has continued to improve in June, and some other interim results reflect increased demand. The rate of job losses is slowing and price pressures are easing, but a slight decline in output makes for a less rosy picture," said Bruckbauer, describing the most important details of the latest survey carried out by Markit Economics on behalf of Bank Austria.

"In June, Austria's industrial companies recorded an increase in orders received for the second consecutive month. However, backlogs of work is down slightly again and output has actually declined a little after recording a small increase in the previous month," said Bank Austria economist Walter Pudschedl. The reduction in the quantity of purchases too points to the still quite uneven, albeit now stronger, demand environment faced by Austria's export-oriented industry.

The difficult framework conditions have seen Austrian manufacturers focus increasingly on further optimising their inventories. "Stocks of purchases and of finished goods were again reduced in June to keep the resulting costs down during the weaker sales months. However, current stock movements also point to an upcoming slight increase in demand. Stocks of finished goods have decreased quite significantly in June and the reduction in stocks of purchases has slowed down markedly," said Pudschedl.

"Recent price trends too reinforce the idea that as a result of increasing demand, industry may now be on the road to recovery. Despite fierce competition, output prices largely stabilised in June. Moreover, the pace of reduction in the prices of primary materials and raw materials on the international markets has slowed," said Bruckbauer. For the sixth consecutive month, the price trend in purchasing and sales has now already led to a reduction in costs for Austrian firms, which particularly benefited companies in the intermediate and capital goods industries in June.

So far, the heavily export-oriented Austrian industry has held up fairly well this year despite the weak international environment. Austrian industrial production stagnated in the first four months of 2013. In both May and June, Bank Austria's Purchasing Managers' Index fell slightly short of the growth threshold, which prolonged the period of sluggish development until the beginning of summer, as also indicated by the further, if somewhat slower, decline in the employment rate in the sector. Given the slightly stronger demand environment, however, the prospects for recovery in industrial activity have improved for the coming months. The ratio of order trends to inventory trends has proved to be a key indicator in this regard. For the time being, however, the slightly higher level of demand will lead to only a moderate increase in production, taking into account the existing storage capacities. "We are expecting growth of one per cent in the manufacturing sector in 2013. Although industrial activity has stabilised, the factors driving a sustained recovery are not in place yet. However, the positive signals from the US economy and the continued stabilisation of the European economy, especially in Germany, will provide Austrian industry with increasing momentum, with output expected to grow by around four per cent in 2014," says Bruckbauer, analysing the growth prospects for Austrian industry.

The manufacturing sector is set to play a pivotal role in the recovery of the Austrian economy both in the coming months and in 2014, as domestic demand is adversely affected by unfavourable trends in the employment market. Economists at Bank Austria estimate that Austrian industry's export strength will again be a decisive factor in the country’s economic growth, which will increase from 0.4 per cent this year to 1.6 per cent in 2014.

 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.