Bank Austria Purchasing Managers' Index in June:
Weak growth for Austrian industry at midyear

  • Industrial recovery continues to lose momentum: Bank Austria Purchasing Managers' Index falls to 50.4 points in June, the lowest level in a year
  • Slight increase in production despite decline in new orders from abroad
  • No new jobs in Austrian industry for the first time in six months
  • Less stimulus from abroad: industrial growth to remain subdued through the summer
  • More robust growth expected for the second half of the year on the back of increased support from foreign markets

Austria's industrial growth has come to a virtual standstill at midyear 2014. "The Bank Austria Purchasing Managers' Index fell to 50.4 points in June, indicating only minimal growth in Austrian industry. After a promising start to the year, industrial activity has consistently lost momentum over the course of 2014 up to now. The reason for this development is that the support coming from international markets has declined due to the weakness of several emerging markets," explained Stefan Bruckbauer, chief economist at Bank Austria. All of the subcomponents of the monthly survey of Austrian purchasing managers have been clearly losing momentum since the beginning of 2014. And the current Bank Austria Purchasing Manager's Index fell to the lowest level seen since the summer of 2013. "The 0.5 point drop in the indicator compared with the prior month in June was primarily caused by a deterioration of the order situation. Although there was once again a slight increase in production in order to process existing orders, companies did not hire additional employees in view of the development of new business," said Bruckbauer.

Austrian industry suffered a decline in orders for the first time in 14 months. "In June, there was a drop-off in both domestic orders and orders from abroad," said Bank Austria economist Walter Pudschedl, adding: "The weakness of the emerging markets is currently making itself felt in the form of the first decline in new business in the past year. Along with China and Russia, Austrian companies are currently facing significant drops in demand from South America, as well." Despite the deterioration of the order situation, however, production was once again increased in June in order to fill existing orders. As in the previous month, the production index came in at 51.9 points. Because sales were weaker than expected, companies were forced to deal with the largest increase in inventories of finished goods in more than two years. In contrast, inventories of input materials were reduced once again in light of the lacklustre development of new business.

Austrian companies in the manufacturing industry have added roughly 1,000 new jobs since the beginning of the year due to the moderate increase in production. However, the deterioration of the demand environment in recent weeks is now being reflected in the planning of personnel capacities: Employment growth came to a halt in June. "The seasonally adjusted employment figure for Austrian industry remained largely constant at roughly 584,000 at the middle of the year, because while some companies hired new employees due to increased production requirements, other companies cut jobs in order to reduce costs, which essentially balanced out the situation," reported Pudschedl. Due to a growing potential labour force and stagnating employment, unemployment is increasing significantly at the moment. Bank Austria's economists now expect the average unemployment rate for the overall economy to climb to 8.4 per cent in 2014.

Prices started to move a bit again in June. Both purchasing and selling prices increased slightly for the first time in two years. Suppliers raised their prices due to capacity shortages, which more than offset the simultaneous drop in prices for various input materials, such as steel. Despite moderate sales growth, selling prices were raised, albeit only to a limited extent due to the intense competitive pressure. Overall, the price trends in purchasing and sales led to a reduction of cost pressures on Austrian industrial companies.

Following the promising start to the year, the Bank Austria Purchasing Managers' Index has consistently indicated a downturn in industrial activity in Austria. The growth in the production sector has come to a virtual standstill at midyear. Particularly the weaker demand from the emerging countries is having a negative impact. However, the support from the recovery in the Eurozone has also lagged behind expectations thus far and the international conditions do not promise any major stimulus for Austrian industry in the immediate future. The preliminary purchasing managers' index for the Eurozone fell to 51.9 points in June. Despite this overall decline, however, the European peripheral countries experienced an upward trend, which suggests that the recovery in Europe will further solidify in the coming months. In addition, the global recovery is still under way. China is showing increasing signs of stabilisation and the US has been able to improve upon its performance in the second half of 2013. "We are optimistic that Austrian industry will once again enjoy more robust growth in the coming months on the back of increased support from foreign markets. As a result, we expect the gain in industrial production of just under 3 per cent seen in the first half of the year to increase to as high as 4 per cent for 2014 as a whole," said Bruckbauer.

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.