Bank Austria Purchasing Managers' Index in March:
Austrian industry loses some momentum after strong growth at the start of the year

  • Bank Austria Purchasing Manager's Index drops 2 points to 51 in March
  • Production growth restrained by slowing increase in orders, but remains in the black
  • Employment levels unchanged in March
  • Drop in demand lowers input and output prices
  • But industrial recovery continues: growth of 4 percent expected for 2014

The upswing in Austrian industry is losing momentum. "Following the high figures posted at the turn of the year (2013/14), Bank Austria's Purchasing Managers' Index fell to 51 points in March. The indicator dropped by 2 points compared to the previous month, and is therefore at its lowest reading since the summer of 2013", said Bank Austria's chief economist Stefan Bruckbauer, summarising the current trends. In spite of this second consecutive decline, Bank Austria's Purchasing Managers' Index for March still lies above the 50-point mark and therefore in a range that suggests continued growth for Austrian industry compared to the previous month. All of the details in the monthly survey among Austrian industrial businesses, however, confirm a slowdown in the upturn of the Austrian manufacturing sector towards the end of the first quarter in 2014. "Slowing growth in orders during March produced a moderate increase in output, but this had no impact on employment. Both input and output prices fell amidst waning demand while attentions increasingly focused on a cost-centric inventory policy", said Bruckbauer, outlining the main findings of the monthly survey among purchasing managers at Austrian manufacturers.

The weakening of Bank Austria's Purchasing Managers' Index in March was principally caused by a noticeable drop in the pace of new orders, which was reflected in weaker growth of output. "The output index dropped in March to 51.3 points, its lowest reading since July 2013. While capital goods manufacturers reported solid business developments, setbacks were observed for intermediate goods in terms of both production and new orders", revealed Bank Austria economist Walter Pudschedl. All told, however, domestic demand and new export business continued to rise in March, driven by robust demand from Western Europe. Growth in orders was sufficiently strong in March to increase the backlog of work for the eighth month in a row, albeit only slightly.

Falling prices
"Given the slowing growth in demand, both input and output prices fell in March. The first reduction in input prices since the summer of 2013 was much more pronounced on average than the decline in output prices, which on the whole brings about a modest easing of cost pressure for companies compared to the previous month", said Pudschedl. Besides the change in demand, which was reflected in reduced purchase quantities too, the drop in input prices was also the result of fierce competition. Manufacturers of intermediate goods found themselves particularly affected, while input prices for consumer goods rose slightly. The contraction in output prices was equally influenced by the strong competition and oversupply.

The lower order and output growth prompted Austrian industrial companies to be even more cost conscious with managing their inventories. Stocks of purchases were scaled back significantly in March again, while stocks of finished goods declined for the fourth time in a row. Processing new and existing orders resulted in lower inventories in March, which was reflected in yet another increase in average delivery times.

"The upswing in Austrian industry led to higher employment in the manufacturing sector for the third time in a row. This increase in jobs remains very moderate though and is concentrated at companies in the capital goods sector that are planning to expand capacities. The current pace of output growth means we do not expect any noticeable rise in manufacturing employment over the coming months either", said Bruckbauer. For roughly two years now, employment in the Austrian manufacturing sector has been relatively constant at approximately 584,000, which means it is roughly 20,000 less than at the start of the economic crisis in 2008.

Industry growth continues despite higher risks
Bank Austria's latest Purchasing Managers' Index makes it clear that the impressive growth from the start of 2014, which manifested itself in a rise of industrial production in January by 4.6 percent yoy, has slowed as we move into the end of the first quarter in 2014. Yet the manufacturing sector is still growing, the order situation is improving and the order book is thickening. The correlation between new orders and inventories is down slightly compared to previous months, but is still clearly in positive territory. In the past this has been a reliable indicator for sustained upwards development in the industry. "Irrespective of the burgeoning risks, such as the growing uncertainty brought on by economic worries in China and other emerging markets as well as the situation in Ukraine, the latest Purchasing Managers' Index from Bank Austria shows that Austrian industry will be able to maintain its upward trend in the coming months. We uphold our growth projection for the sector at 4 percent in real terms for 2014, after 0.7 percent in 2013", concluded Bruckbauer.

 charts (PDF; 38 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.