24You

The new online banking of Bank Austria.

BusinessNet

The online banking for companies.

olbImgAlt To the MegaCard GoGreen-youth account
MegaCard GoGreen-youth account. The free MegaCard GoGreen-youth account for everyone from 10 to 20 years, and receive a welcome gift. To the MegaCard GoGreen-youth account
15.04.2014

Bank Austria Business Indicator:
Prospect of 2 percent growth in 2014 despite higher risks from emerging economies

  • Bank Austria Business Indicator rises slightly in March to 1.0 points: Industry sentiment in Austria defies the Crimea crisis and concerns about growth in China, moderate increase in consumer confidence
  • Recovery in the euro zone but some headwinds from emerging economies. Despite this GDP grew in the first quarter of 2014 by approx. ½ percent compared to the previous quarter
  • Outlook for economic growth remains favourable: Less support from the emerging economies but the recovery has stabilised in Europe
  • Escalation of the Crimea crisis currently the biggest risk for Austria's economy: Nevertheless, growth forecast of approx. 2 percent in 2014/2015 remains unchanged

The Austrian economy is continuing its recovery in spring 2014. "In March the Bank Austria Business Indicator rose to 1.0 points. After decreasing at the turn of the year, it has almost returned to its autumn level again, but has been unable to gather greater momentum", said Bank Austria chief economist Stefan Bruckbauer. The economic engine has ignited as expected, but for months has only been running in low gear. In view of the only slight increase in the current Bank Austria Business Indicator there is no reason to assume that economic growth will accelerate significantly. "As we expected the recovery is consolidating itself throughout Europe, also in peripheral countries. Only the support from emerging economies is slightly weaker, which means growth in the first quarter will probably have totalled no more than ½ percent compared to the previous quarter," said Bruckbauer.

As a result the pace of recovery in the first quarter of 2014 was still slightly higher than at the end of 2013, when GDP grew by 0.3 percent compared to the previous quarter. This was partly attributable to a slight increase in foreign demand and the gradual easing of the investment backlog. "While demand for exports and investment in the first quarter remained slightly below our expectations, private consumption provided greater momentum, supported by a low year-on-year inflation rate that averaged only 1 ½ percent", said Bank Austria economist Walter Pudschedl. Furthermore, two special effects provided tangible support: In the vehicle trade the increase in the standard consumption tax on new cars (NOVA), which came into force on 1 March 2014, resulted in purchases being brought forward, while the construction industry profited from the mild winter.

"The Bank Austria Business Indicator has risen again since the weaker figures at the beginning of the year. Although business activity is only growing slowly the improvement can be seen across the board. All components are pointing upwards," said Pudschedl expressing his confidence. Austrian industry now considers that the business outlook is already more favourable than it has been on average over the long-term. In particular, the solid upward trend in Austria's two most important markets, Germany and Austria, is lifting the mood in Austria. In addition, more orders are now being placed from peripheral countries. However, consumer sentiment is only improving slowly. Due to continuing poor employment data consumer confidence currently remains below the long-term average.

The Bank Austria economists are optimistic that the domestic economy will gather momentum in the coming months. Pudschedl is convinced that "the first quarter did not mark the peak of growth momentum in 2014," adding "the economic recovery in Europe is progressing well and is stabilising in the core countries, in particular Germany, as well as on the periphery." Progress toward establishing the banking union has further reduced uncertainties in connection with the euro crisis, as was impressively demonstrated by Greece’s return to the capital markets a few days ago. Financing terms, also for businesses, are extremely favourable thanks to the persistently expansionary monetary policy of the European Central Bank and are conducive to investment. In addition, demand is no longer being curbed as much as in previous years by the forced spending cuts in public budgets in most European countries.

"We are currently confirming our forecast that GDP will grow by up to 2 percent in 2014 and 2015, although the risk that this forecast will have to be adjusted downward has risen. In addition to the slowdown in economic activity in China, the crisis in Ukraine is emerging as the biggest potential disruptive force"; according to Bruckbauer's analysis. The Crimea crisis not only threatens economic activity and financial stability in Russia and Ukraine, it will also pose a threat to continued recovery in Europe if it escalates further.

 charts (PDF; 43 KB)

Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel. +43 (0) 50505 - 41957;
E-Mail: walter.pudschedl@unicreditgroup.at: