Bank Austria Purchasing Managers' Index for April:
Austrian industry continues to grow – but somewhat less dynamically than at the turn of the year

  • Bank Austria Purchasing Managers' Index nudges up to 51.4 points in April
  • Production increases despite slowing growth in orders
  • Moderate increase in employment since start of 2014 continues – but focus still on improving productivity
  • Sharper fall in input prices compared to marginal drop in sales prices eases pressure on Austrian companies
  • Ongoing recovery in eurozone signals cheerful spring for Austrian industry: production still expected to grow by 4 percent in real terms in 2014

Pre-crisis levels were breached for the first time after the blistering start to 2014 by Austrian industry, but the recovery since March has been somewhat more subdued. "That said, the pace of growth has picked up slightly again. Bank Austria's Purchasing Managers' Index climbed by 0.4 to 51.4 points in April. This means the indicator signals slightly faster growth in Austrian industry compared to the previous month", said Bank Austria chief economist Stefan Bruckbauer. The reading just above the growth threshold of 50 points currently reveals moderate expansion in Austrian manufacturing industry, but the upwards trend has now prevailed for nine months in a row. The indicator crossed the 50-point mark for the first time in this cycle back in August 2013. "The moderate improvement in industrial activity in April is principally down to the robust expansion in production, despite the stagnating order flow. New jobs have also been created in the sector, albeit to a very small extent. The falling prices and the contracting inventories also signal that companies are operating cautiously in the current climate", said Bruckbauer, summarising some of the detailed results of the monthly survey among Austrian purchasing managers.

Bank Austria's Purchasing Managers' Index was influenced most in April by the sharp increase in production output. The production index rose by a total of 2 points to 53.3 points. "Austrian industrial companies bumped their production up in April to the extent that order backlogs declined compared to the previous month for the first time since the summer of last year. However, this was also attributable to the scant improvement in new orders", argued Bank Austria economist Walter Pudschedl. The incoming orders component sank to 50.7 points, its lowest reading for ten months. Thus while the number of new orders increased marginally on the whole, demand from abroad remained unchanged in April compared to the previous month. While the flow of orders in Europe and in the USA was satisfactory, some businesses received fewer orders from emerging markets in Asia and the Americas.

The upwards trend in orders for Austrian industry since the summer of 2013 has also resulted in a steady increase in HR capacities since the start of the year. In spite of the trend reversal in industrial employment seen for the last few months, the number of jobs in Austrian manufacturing stood at roughly 576,700 in the first quarter of 2014, still nearly 1,000 less than in the same quarter the previous year, and more than 20,000 less than the figure registered before the crisis broke out in 2008. "New jobs were created in Austria again in April. But the hiring of new personnel was still very restrained, and this will remain so for the time being", said Pudschedl, analysing the situation, before adding: "While capacity-in-use of Austrian industry did rise around the turn of the year, it currently sits at 84 percent, well under the long-term average. This means that for now, higher production is mainly resulting in better productivity."

The output gap is slowly starting to close. This is why the economists at Bank Austria believe that general deflation concerns are exaggerated, even if both input and output prices have fallen for the second month in a row. The sharpest fall in input prices for almost a year is mainly attributable to the cheaper prices of commodities such as copper and steel. Additionally, some companies managed to renegotiate prices with suppliers. The fierce competition and the over-supply on the market weighed down on output prices, even if the decline turned out to be very modest. "The sharp fall in input prices compared with the moderate decline for output prices brought about an improvement in the cost and earnings position of industry in April. Price trends alleviated the pressure on Austrian companies for the first time in 2014", added Pudschedl.

"In April the Bank Austria Purchasing Managers' Index rose slightly. Even if there is still upwards potential with regard to the pace of industrial growth in Austria, the current survey of Austrian manufacturing companies does reveal a stable upwards trend that appears to be sustainable. This assessment is backed up by two trends: on the one hand, for one year there has been a favourable correlation between the new business component and the inventory component, which has always proved to be a good leading indicator for industrial activity. On the other hand, the international equivalents of the Austrian purchasing managers' index surprised on the upside in April, and promise an enjoyable spring for Austrian (suppliers) industry. The US purchasing managers' index remained at a high level in April, standing at 55.4 points, and is faring better than at the turn of the year. Above all, the preliminary purchasing managers' index for the eurozone rose 0.3 points in April to 53.3 points – driven by the positive survey result in Germany, the most important trading partner for Austrian industry. "The recovery in the eurozone is increasingly picking up pace and is able to cope better with the strengthening euro, the intensifying crisis in Ukraine as well as the weaker economies in China and other emerging countries. We assume that Austrian industry will tread a sustainable recovery path in 2014 under these circumstances. In 2014 we still expect industrial growth in Austria will total 4 percent", said Bruckbauer, in conclusion.

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.