Bank Austria Purchasing Managers' Index for October:
Highest survey reading for two years signals clear pick-up of industrial activity
- Bank Austria Purchasing Managers' Index climbs by 1.6 to 52.7 points
- "Made in Austria" booming: strong increase in new orders enables robust expansion in production
- Trend reversal on labour market: employment in industry rises marginally again
- Higher input prices push costs up as output prices remain stable
- Leading indicators reveal continuation in industrial recovery – better prospects for 2014
The upwards trend in Austrian industry picked up pace in October. "After slowing in the previous month, Bank Austria’s latest Purchasing Managers' Index is trending upwards again. Rising 1.6 points to 52.7 the indicator is now at its highest level for more than two years", said Bank Austria's chief economist Stefan Bruckbauer. The most recent survey among purchasing managers at Austrian industrial companies shows that the recovery of Austrian industrial activity is slowly picking up pace and gaining in stability. "The tangible improvement in new orders has enabled businesses to ramp up their production, while price trends still signal a subdued development of costs. The most pleasing development, however, is that for the first time in several months, new jobs were created in industry in October", revealed Bruckbauer, summarising the most important results of the survey.
The powerful increase in demand for products "made in Austria" generated the largest contribution to the rise in Bank Austria's Purchasing Managers' Index in October. "Austrian industrial companies have now enjoyed an increase in new orders for the sixth month in a row. There was a particularly strong rise in demand from abroad in October. The backlog of works is now the biggest it has been for roughly two and a half years", explained Bruckbauer. The improved order situation has enabled Austrian companies to ramp their production output up significantly, with the production index in October sitting above 55 points. In comparison to earlier upswings, the components of Bank Austria's Purchasing Managers' Index relating to new orders and output currently display a gentle upturn, but every single component is already higher than its long-term average.
Growing demand has resulted in noticeable increases in prices of some raw materials and intermediate products. Input prices in October rose more quickly than they have done for approximately one year. Given the tight competition, however, Austrian businesses were unable to raise their output prices. "The robust increase in input prices coupled with the stable trend in output prices put more pressure on cost and earnings margins for Austrian industrial companies in October than in the previous month", said Bank Austria economist Walter Pudschedl, analysing the situation.
The first signs of a turnaround in economic activity appeared in the summer, and the production output of Austrian firms has been rising for four months. But in October, the recovery in industry also had a positive impact on the labour market for the first time. "Jobs have been lost in manufacturing for roughly eighteen months; that trend has now drawn to a close. That said, the current employment index has only turned up slightly to a reading of 50.6 points. For the time being this is just an indication of stability on the labour market", emphasised Pudschedl, before adding: "The current order trend allows us to expect at least a moderate increase in industry employment in the coming months, from its present, seasonally adjusted level of approximately 580,000". While production output in real terms is already higher than pre-crisis levels, the level of employment in Austrian manufacturing is still around 20,000 or more than 3 percent below the peak before the outbreak of the crisis in 2008. The trend reversal in industry is now also making itself felt on the labour market, but the economic recovery will only influence developments on the general labour market in the course of the first half of 2014. The economists at Bank Austria still expect the unemployment rate to come in at 7.6 percent in 2013 and 2014.
The international climate for Austrian industry picked up again in October. The Chinese purchasing managers' index rose from 50.2 to 50.9 points. This is the first sign that the improved growth dynamics in the Far East have been maintained at the start of this last quarter in 2013. The sentiment indicators are pointing upwards in Europe too, and the latest purchasing managers' index for manufacturing in the eurozone rose to 51.3 points (September: 51.1). The German index generally points the way for Austrian industrial trends, and it sent a positive signal by rising 0.4 to 51.5 points. Alongside the improved international conditions, the persistently high relation of new orders to stocks in Bank Austria's latest purchasing managers' index augurs well for a continuation of the recovery in Austrian industry that began in the summer – especially since inventories based on new and follow-up incoming orders are still low. "The increase in Bank Austria's Purchasing Managers' Index in October was surprisingly robust and broadly based: The pace of the recovery in industry, however, is much slower than in previous upturns, and it will remain so. Nonetheless, we expect that international support of industrial growth in Austria will pick up momentum in the coming year, and therefore we uphold our forecast of 4 percent industrial growth in 2014", summarised Bruckbauer.
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Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 50505 - 41957
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.