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
28.08.2014

Bank Austria Purchasing Managers’ Index in August:
Industrial activity slightly positive thanks to export orders

  • Bank Austria Purchasing Managers' Index remains unchanged in August at 50.9 points
  • Austria's industry growing moderately thanks to export demand
  • Weak domestic orders lead to reduced overall demand
  • Strong increase in input prices puts strain on domestic industrial earnings
  • Inconsistent industrial outlook: Manufacturing growth in 2014 expected to average only 2 percent – stronger than in 2013, nevertheless

Local industry continues to lack momentum this summer. "The Bank Austria Purchasing Managers' Index remains unchanged in August against the previous month. At 50.9 points, however, it continues to exceed the 50-point threshold, which signals growth. Despite numerous geopolitical pressures the industry remains on a growth course – albeit a modest one – thanks to export orders," said Bank Austria chief economist Stefan Bruckbauer. After the noticeable upswing at the beginning of the year, however, the industry has all but lost the growth momentum experienced since spring. The results of the monthly survey of Austrian purchasing managers in August paint a rather weak picture of domestic industry with only a few bright patches. "While production performance expanded once again in August and even employment increased slightly, stock and price trends, a decline in purchasing volumes, and more especially, the sharp decline in new business growth are indicative of the current slow growth levels being experienced by Austrian industry", said Bruckbauer.

This, despite Austrian industrial companies having increased production output in August. At 53.5 points, the production index is on a par with that of July and almost the same figure as around year-end. "Given fewer new orders, the clear increase in production in August is surprising. New business, however, declined for the third month in a row, and this time by almost as much as one and a half years ago. The rising export demand has nonetheless given companies some cause for optimism and led to a further increase in production in August," concludes Bank Austria economist Walter Pudschedl. While export demand lends moderate support to industrial activity, the development on the domestic market is more sluggish. New business trends show that domestic and exports markets are currently drifting apart economically.

"While both the trend in stock levels and the current price trends do indeed reflect the current weak growth in the industry, they send some encouraging signals," said Pudschedl. Given the decline in aggregate demand, domestic businesses have indeed acted more cautiously in August than in the past few months in terms of purchasing, and the moderate reduction in the purchasing volumes led to slightly lower stocks of raw materials. Stocks of finished goods rose again slightly, because despite a current lack of demand, production levels were not only maintained, but increased. Obviously, companies expect an upturn in business in the coming months, in spite of existing geopolitical challenges, such as the Russia-Ukraine crisis in particular. This ray of sunshine is accompanied by an increase in input prices for a number of commodities and raw materials. In view of stiff competition and weakening demand, however, rising costs could not be passed on to output prices. Prices therefore followed a downward trend in August, contributing to a deterioration of average profitability for the domestic industry.

Fortunately, the current survey of Austrian purchasing managers shows that after two months of decline, employment in the industry rose again in August. With an average of 584,000 jobs in Austria's manufacturing industry this year, the figure is much the same as last year's. "With the quiet growth pattern, a clear positive employment trend for the coming months is not expected. The industry in 2014 will thus not be a driver of a turnaround in the overall labour market, as we originally expected. The industry will, however, at least mitigate unemployment in Austria somewhat primarily due to the increase in job offers," said Pudschedl confidently. Economists at Bank Austria expect an average unemployment rate of 8.6 percent for 2014.

Domestic industry continues to lack the impetus for a vigorous expansion. Yet the Bank Austria Purchasing Managers' Index for August shows that with steady values just above the 50-point mark, the Austrian manufacturing industry has been able to maintain moderate growth despite adverse conditions. Although the details of the monthly survey reflect a mediocre economic outlook, they also contain some encouraging results which lend credence to the prospect of a slight upturn in industrial activity in the months ahead. Orders from abroad have risen again and, indeed, are at least as strong as they were six months ago. Despite current geopolitical risks, export-oriented industries will have the advantage in the coming months over companies which are heavily dependent on domestic demand, and will be able to play to this strength. "Due to the weakening industrial activity so far this year, we expect a rise in industrial production of around 2 percent only in 2014. If that's the case, sector expansion will be at least a little stronger than last year," said 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 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.