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29.09.2014

Bank Austria Purchasing Managers’ Index for September:
Industrial activity noticeably weak at beginning of autumn

  • Bank Austria Purchasing Managers' Index fails to indicate growth for the first time since summer of 2013: Surprisingly steep decline to 47.9 points in September
  • Austrian industrial activity slows in comparison with overall European trend
  • Cuts in production output following largest decline in new orders in two years
  • Lack of demand dampening price development – impacting earnings position of Austrian companies
  • Following stagnation in third quarter, outlook for industry also subdued until the end of the year

After showing isolated signs of weakness in recent months, Austrian industrial activity slowed significantly at the beginning of autumn. "The Bank Austria Purchasing Managers' Index fell to 47.9 points in September. This drop below the 50 mark indicates that the industrial sector contracted compared with the previous month, marking the first time that Austrian industry has deviated significantly from its growth path since the summer of last year," explained Stefan Bruckbauer, chief economist at Bank Austria. Although the decline in growth suffered by Austrian industry comes as no great surprise considering the steady increase in geopolitical risks seen in recent months, the extent of the current decrease in the Bank Austria Purchasing Managers' Index is somewhat unexpected. "The Bank Austria Purchasing Managers' Index suffered its most substantial loss in roughly three and a half years in September. Compared with the overall developments in Europe, the performance of Austrian industry is a bit of an aberration: The purchasing managers' index for the Eurozone also fell, but only by a moderate 0.2 points to 50.5, putting it in a range that indicates at least slight growth in Europe," added Bruckbauer.

The deceleration of Austrian industry at the start of autumn is primarily reflected in a weak order situation. In the past several months, support had still been coming from foreign demand. "September saw a decline in both domestic and foreign demand, which resulted in the largest drop in new orders in nearly two years. The lack of new orders caused Austrian industrial companies to cut production output for the first time in over a year," said Bank Austria economist Walter Pudschedl, summarising the situation. The insufficient capacity utilisation also led to an acceleration of the decline in backlog of work.

After a moderate upward trend starting at the beginning of the year, employment stagnated in the industrial sector during the summer. Due to the weak development of orders and the resulting production cutbacks, Austrian industrial companies reduced their personnel capacities in September. At an average of 583,000 for the current year, employment in the Austrian manufacturing industry is largely the same as the level seen last year. However, the average number of unemployed persons is roughly 9 per cent higher than last year. "Despite the current downtrend, the development of the labour market in the Austrian industrial segment is still much better than in the overall economy. At roughly 5 per cent, the unemployment rate for Austrian industry in 2014 will be much lower than that of the overall economy, which we expect to average 8.5 per cent this year," said Pudschedl.

The lack of demand Austrian industrial companies were confronted with in September is also reflected in the current price trends. While input prices continued to rise in September as some raw materials and input materials became more expensive, acceleration in prices clearly slowed compared with the previous month and was moderate overall. "Due to the intense competition, Austrian companies could not transfer their higher costs into their output prices. On the contrary: The surplus on the market led to the most significant drop in output prices in more than four and a half years," reported Pudschedl. In the current market conditions, price developments are having a negative impact on the earnings position of most Austrian industrial companies.

All subcomponents of the monthly survey conducted among Austrian purchasing managers worsened at least slightly in September compared with the previous month. The Bank Austria Purchasing Managers' Index, which expresses the results of the survey regarding the economic situation in the industrial sector as a point value, indicates a moderate decline in business activity at the start of autumn. This puts the average index level for the third quarter near the 50 mark, which translates to a stagnation in industry. "The outlook for industrial activity for the coming months remains subdued, particularly because the economic recovery in Austria is facing significant headwinds at the moment. Along with the Russia-Ukraine crisis, the weaker demand from the emerging countries is having a negative impact. Thus, Austria’s industrial activity will likely gain little momentum between now and the end of the year, despite the moderate support coming from the weak euro," explained 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.