Bank Austria Purchasing Managers' Index in July:
Austrian industry catches Europe's tailwind

  • Bank Austria Purchasing Managers' Index is still only just shy of the growth zone in July: 0.8 point rise to 49.1 is its highest value since November 2012
  • Order books are noticeably fuller: Companies are increasing output
  • Austrian industry is following Europe on the path to growth: A recovery during the second half of the year should enable a 1% increase in industrial output for 2013; faster growth of 4% expected for 2014
  • Increase in the pace of job cuts underlines ongoing anxiety about the economy

An end to the sideways trend in Austrian industry is on the horizon, with the monthly survey of Austrian purchasing managers suggesting that the manufacturing sector will recover during the second half of the year. "The Bank Austria Purchasing Managers' Index recorded a marked increase to 49.1 points during July", said Bank Austria's chief economist Stefan Bruckbauer. "This means that it is still just below the 50-point threshold that indicates growth in the sector. A few details, however, are now clearly pointing towards an upturn in industrial activity in Austria." Having stabilised during the second quarter, the Bank Austria Purchasing Managers' Index for July has reached its highest point since November 2012. "An increase in new orders during July boosted Austrian industrial output. There is still some uncertainty, however, regarding the future course of the economy, and this is reflected in a reluctance to make purchases, a highly cost-conscious approach to inventory management, and a further fall in the number of people in gainful employment", said Bruckbauer, summing up the key results from the Markit Economics survey conducted on behalf of Bank Austria.

Austrian industry is benefiting from a noticeable increase in demand. "July saw Austrian companies picking up more new and follow-up orders for the third successive month. In addition, the increase in orders was the highest for 18 months and was underpinned by a rise in both domestic and export demand", explained Bank Austria economist Walter Pudschedl. Orders from abroad had been falling as recently as the previous month.

The positive trend in new business had a swift knock-on effect on the output figures for Austrian industrial companies. "July saw Austrian industry increase its monthly output for the second time in the last three months. Admittedly, the increase was pretty modest, but it was still the biggest rise seen since this time last year", Pudschedl emphasised.

In spite of improved demand, however, Austrian industrial companies have again been purchasing less as a result of lingering anxiety about the wider economy. This is particularly true of manufacturers of consumer and intermediate goods. Capital goods purchasing increased, a possible indicator that business will soon be picking up. Austrian industrial companies are also sticking with their cautious and therefore cost-conscious approach in terms of inventory management. Conscious efforts to reduce inventories led to a decrease in stocks of both purchases and finished goods in July, with the trend from previous months also being magnified by rising demand. "As far as Austrian industrial companies are concerned, increasing demand is still being covered by existing surplus capacity, and this is reflected in reduced order backlogs and, in particular, in the number of redundancies in the sector during July, which actually increased", Pudschedl explained. Austrian companies are pointing to cost-reduction measures and restructuring exercises to explain their job cuts.

"The latest price trends underline the fact that industrial activity is starting to pick up as demand increases. Following the period of stabilisation during the previous month, companies were able to increase output prices in July for the first time in almost half a year, in spite of fierce competition", said Bruckbauer, analysing the situation. By contrast, lower raw material prices, particularly for steel, meant that average input prices actually fell a little faster than the previous month. For the seventh consecutive month, price trends in terms of input and output contrived to reduce the cost burden for Austrian firms.

"The rise in the latest Bank Austria Purchasing Managers' Index shows that industrial activity in Austria is on the up again. In European terms, this trend is rather belated. The purchasing managers' index for the manufacturing sector in the Eurozone crept up into the growth zone for the first time since January 2012 at 50.1 points, and although the Austrian PMI for July is only slightly below the growth zone, it is nevertheless not quite there yet", Bruckbauer concluded. Business sentiment is picking up both in core countries such as Germany, where the IFO index rose yet again, and in the peripherals, indicating that Europe will return to the path of growth during the second half of the year.

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.