30.12.2013

Bank Austria Purchasing Managers' Index for December:
Austrian industry still on the rise at the turn of the year

  • At 54.1 points in December, Bank Austria Purchasing Managers' Index points to continued robust growth
  • Highest increase in production since beginning of 2011
  • Productivity growth still leading to job cuts for the time being
  • Accelerated increase in purchasing prices also straining the cost situation of Austrian companies
  • Demand environment promises good prospects for 2014

After the lacklustre development of business in the first half of 2013, the recovery in Austria's industry is increasingly picking up speed. "With a reading of 54.1 points, the Bank Austria Purchasing Managers' Index confirms that Austria’s industry overcame the stagnation at the end of 2013," said Stefan Bruckbauer, chief economist at Bank Austria. The improvement of the business environment for Austria's industrial companies is becoming more and more apparent and the positive trend is becoming increasingly stable. "Demand picked up considerably in December, which led to a significant expansion of production. Order backlogs are increasing, but rising purchasing prices are causing difficulties for companies and personnel capacities are still being reduced despite the upward trend," said Bruckbauer, summarising the key results of the monthly survey of Austrian purchasing managers.

Austrian industrial companies ramped up production significantly in December. At 57.2 points, the sub-index for production output is at the highest level seen since April 2011. "The Austrian industrial sector has been expanding production for six months now thanks to the persistent growth in new and follow-up orders. The high growth in orders in December was primarily due to domestic demand, but the export markets of the US and Europe also provided solid support," said Bank Austria economist Walter Pudschedl. In December, the strongest increase in orders in almost three years also led to a hefty rise in orders on hand, which will have to be processed in the coming months.

"Despite the improvement in the demand environment that has been going on for several months and the considerable expansion of production that continued in December, employment declined in the Austrian industrial sector once again. In fact, more jobs were cut in the final month of the year than in the previous month. This means that there was a drop in the headcount in the industrial sector in every month of 2013 except March and October," said Pudschedl. In light of the still below-average level of capacity utilisation, a reversal of the trend on the labour market will require an even stronger continuation of the upswing in production in the coming months, because at the moment the increase in production is primarily leading to an improvement of productivity in the Austrian industrial sector, and the production level seen in 2007 has not yet been fully reached.

Although the rising production requirements of Austrian companies in December led to a considerable increase in purchasing volumes, there was a slight decline in stocks of input materials. Suppliers also came under pressure due to the increased purchasing activities of industrial companies and because inventory levels were being maintained at low levels for cost reasons. Average delivery times increased for the fifth month in a row.

The flip side of the improved demand environment is also being reflected in the current price trends. Suppliers increased their prices significantly, which led to the highest rise in purchasing prices among Austrian industrial companies in over 20 months. "Although there was a marked increase in the prices for input materials and raw materials, the selling prices remained constant for the most part in December. Due to the low price-setting power resulting from the intense competition, the cost pressure on Austrian industrial companies has increased significantly," said Pudschedl.

At 54.1 points, the Bank Austria Purchasing Managers' Index came in clearly above the neutrality threshold of 50 points in December. Austrian industry has been on a growth course for five months now, supported by strong gains in new orders and production, which have actually accelerated even further according to the current readings. In addition, the chances that the upward trend seen in the past several months will continue are very good as we transition from 2013 to 2014. First of all, the ratio of new orders to inventories points to increasing momentum in the sector in the coming months. This has always been a very reliable indicator of coming industrial activity. Secondly, the improvement of the economic environment is continuing throughout Europe. The purchasing managers' index for the Eurozone rose to 52.7 points in December and the purchasing managers' index for Germany, which is by far the most important export market for Austrian industry, reached 54.7 points, the highest level seen in nearly three years. Based on these developments, Bank Austria expects a real production increase of up to 4 per cent in 2014, after roughly 1 per cent in 2013.

 charts (PDF; 66 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.