Bank Austria Purchasing Managers Index for November:
Slack performance in Austrian industry continues, but no more steep declines

  • Bank Austria Purchasing Managers’ Index rises 0.5 points to 47.4, but Austrian industry contracts again in November
  • Pace of decline in production output stabilises, despite a slump in new export orders
  • Demand remains weak: prices declining, inventories still falling, backlogs of work shrinking, and job losses continuing unabated
  • Austrian industry will only return to a growth path from the first quarter of 2015, with the weak euro, lower oil prices and the robust US economy as supportive factors

For the first time in the last half year, the pace of decline in Austrian industry did not accelerate. “In November, the Bank Austria Purchasing Managers’ Index increased by 0.5 to 47.4 points. While this figure is still below the 50 mark and thus indicates further contraction for Austrian industrial firms compared to the previous month, the pace of contraction slowed down somewhat in November,” explained Bank Austria chief economist Stefan Bruckbauer. Slack demand conditions are weighing on Austrian industry and are a major factor determining corporate decision-making. “In November, Austrian industrial output declined at a somewhat slower pace than in the previous month, in particular as there was a slightly smaller drop in new orders. At the same time, backlogs of work are shrinking quickly, purchasing volumes are being cut back, input prices are falling sharply and personnel capacities continue to be rapidly adjusted to the slack demand conditions,” said Bruckbauer, summarising some of the details from the monthly survey of Austrian purchasing managers.

November’s decline in Austrian industrial output was not as pronounced as it was in the previous month. Nevertheless, at exactly 48 points, the output component was at the second-lowest level in roughly the last two years and has now been pointing to contraction for three months in a row. “The downward trend in output was mitigated by a slower decline in new orders. While domestic orders consolidated at a low level in November, new orders from abroad plunged,” said Bank Austria economist Walter Pudschedl. Slack economic conditions in the major export markets and the increasingly intense competition resulted in the strongest decline in orders from abroad in the last one and a half years. Austrian companies were apparently surprised by the extent of this drop in orders, as they did not adjust their production strongly enough to the weak demand to allow them to avoid another significant fall in the backlog of work.

In light of the persistently weak demand conditions, Austrian manufacturing firms have adjusted their personnel capacities to the lower production needs. In November, employment continued to fall at the same fast pace as in the previous month. “With an average headcount of 583,000 employees, slightly fewer people are employed in industry so far this year compared to last year. After four straight years with employment gains and an increase totalling 20,000 jobs since 2010, this year will be the first time we see a decline, whereas the number of jobs in the overall economy has increased by 0.6 per cent in the same period,” continued Pudschedl.

The lack of positive momentum in the economy has prompted Austrian industrial firms to be even more cautious in purchasing. “Austrian companies have generally not taken advantage of the lower prices of oil and other commodities on the world markets, due to the prevailing demand environment. Despite falling input prices, the quantity of purchases in November declined more strongly than any time previously in the last two years, especially since there was a sharper focus on inventory reduction programmes, due to cost considerations,” noted Pudschedl. Stocks of purchases dropped sharply, albeit not as much as in the previous month. On the other hand, stocks of finished goods remained broadly unchanged in November. In the months ahead, it will become clear whether this is due exclusively to the slack demand or whether industrial firms are already adjusting their stocks in anticipation of an upcoming recovery in demand.

As the end of 2014 approaches, however, there are some details in the monthly survey of purchasing managers which indicate that, by and large, Austrian industry is through the worst of it and will soon be gaining momentum again. All of the components are decelerating at a slower pace and, all in all, the Bank Austria Purchasing Managers’ Index is higher than the lowest reading for the year, which was registered last month. One positive signal for Austrian industry is the current increase in the German IFO business sentiment index. Companies appear to have digested the problems stemming from the Russia/Ukraine conflict, and at the same time leading indicators for export business are improving. “The weaker euro, the significantly lower oil price and the strong performance of the US economy are three key arguments for a recovery in Austrian industrial performance starting from the first quarter of 2015. We are optimistic that these factors will prevail over the excessive pessimism seen in recent weeks and that Austria’s industry will return to growth again after a soft patch in the last six months of 2014,” said Bruckbauer in conclusion.

tables (PDF, 100KB)

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.