Bank Austria Purchasing Managers’ Index for August:
Austrian industry makes impressive comeback – economy once again on growth path

  • Bank Austria Purchasing Managers' Index returns to growth territory for first time in a year in August: all subcomponents support a substantial rise to 52 points
  • Strongest production increase in more than two years
  • Significant improvement in domestic and foreign order intake
  • Only employment is still lagging behind
  • Recovery to continue in 2014 with production growth of 4 per cent

Following a slump that lasted over a year, Austrian industry is now gaining momentum again. "In August, the Bank Austria Purchasing Managers' Index came in above the growth threshold of 50 points for the first time in more than a year. The index improved for the fourth month in a row, climbing to 52 points and thus achieving the best reading since the beginning of 2012," said Stefan Bruckbauer, chief economist at Bank Austria, summarising the index’s development. Although it took the Austrian purchasing managers' index a month to reflect the significant upward trend seen in the majority of European countries in July, the index is now showing very solid development. All of the subcomponents contributed to the gain for the first time in two and a half years. "A considerable surge in domestic and foreign order intake led to an impressive rise in production in August. The increase in orders on hand, the longer delivery times and the current price trends also indicate that domestic industry has settled into a recovery. However, jobs will continue to be cut in the sector for the time being," said Bruckbauer.

In August, Austrian industrial companies significantly increased their production output for the first time this year. In fact, at 54.4 points, the production index is at the highest level seen since May 2011. "Strong momentum in new orders led to the most significant increase in production in Austrian industry in over two years. The improvement of the economy in Europe is filling the order books. Both export demand and domestic demand for industrial products from Austria picked up," said Bank Austria economist Walter Pudschedl. In particular, producers of input goods and investment goods are experiencing a dramatic increase in new and follow-up orders.

The level of orders on hand advanced for the first time this year thanks to the rapidly rising demand. "However, neither the improved order situation nor the rise in production could prevent a further decline in employment in August. The job cuts that have been going on for roughly a year continued at a somewhat slower pace than in the previous months," said Pudschedl. The sluggish economy has had a particularly strong impact on the industrial labour market in recent months. While overall employment in Austria has increased by roughly 20,000 jobs or 0.7 per cent since the summer of last year, the number of employed persons in the material goods industry has decreased by roughly 1,500. "The slight decline in employment in industry and an above-average increase in unemployment in industry are the result of the drop in capacity utilisation in the sector since 2012. Capacity utilisation is currently far below the long-term average. Therefore, the situation on the labour market will remain tense for some time still, but the turnaround will be visible in industry first," said Pudschedl, providing an analysis of the situation. The improvement in industrial activity will likely have a positive impact on the development of employment in the sector before the end of 2013/beginning of 2014. According to the estimates of Bank Austria's economists, however, a reversal of the trend on the overall labour market, which will lead to a general increase in momentum with regard to employment and a decline in overall unemployment, is not to be expected until sometime later in 2014.

The improved business outlook for Austrian industrial companies is counteracting the high level of cost awareness that had dominated companies' inventory management activities in the previous months. Due to the rising demand, purchasing volumes were increased more than they have been in over two years. Stocks of input materials increased again for the first time in more than a year. Although inventories of finished goods remained unchanged overall, companies expanded their sales stocks in order to be able to quickly take advantage of business opportunities.

The turnaround in industrial activity is also clearly reflected in the price trends in August. "While purchasing prices stabilised in August, companies were able to raise their sales prices for the second month in a row thanks to the rising demand," said Bruckbauer, adding, "For the eighth month in a row, the dynamics with regard to purchasing and sales prices led to a reduction of cost pressures on Austrian companies."

The current survey of Austrian industrial purchasing managers shows that the manufacturing sector has returned to a path of growth. Now that the index has moved above the neutral mark of 50 points, the economy will likely start to expand again for the first time in more than a year. The recovery expected for the second half of the year has materialised. "In light of the improvement in the conditions in Europe and the current broadly based upward trend in the Bank Austria Purchasing Managers' Index, we are optimistic about the development of industrial activity in Austria going forward. Initially, however, the increased demand will only trigger a moderate increase in production due to the existing inventories, so we do not expect the development of industrial activity to be particularly impressive in the coming months, but it will certainly be satisfactory," said Bruckbauer. Following the stagnation in the first half of the year, manufacturing is expected to increase by roughly 1 per cent in real terms for the year as a whole. According to the estimates of Bank Austria's economists, 2014 will bring robust average annual growth of roughly 4 per cent.

 tables (PDF; 101 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.