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30.12.2014

Bank Austria Purchasing Managers' Index in December:
Positive signs from the Austrian industry at the end of the year

  • The Bank Austria Purchasing Managers’ Index increased noticeably to 49.2 points in December. Slight increase of production output for the first time in four months – decline of new orders became weaker
  • However, job cuts did not slow down. Unemployment rate of 4.8 percent in industry in 2014 clearly below rate in the overall economy (8.4 percent)
  • Price slump of crude oil improved profit situation of companies
  • Positive signs from sales markets: Austrian industry expected to reach growth of 3 percent in 2015

"The Bank Austria Purchasing Managers' Index increased to 49.2 points in December, which corresponds to an increase of 1.8 points compared to the previous month and is the highest level in four months. Thereby, the domestic industry seems to have ended the downward tendency of the last months at the turn of the year," Bank Austria Chief Economist Stefan Bruckbauer explains. The current survey among purchasing managers of the Austrian industry shows a slight easing of the economic situation compared to the previous months in all sectors. "In December, production output was extended slightly. Decline in demand has slowed down noticeably and new orders are declining more slowly than in autumn. The pace of job cuts, however, has hardly declined," Mr Bruckbauer explains, summarizing the most important results of the December survey.

"The Austrian industrial enterprises surveyed increased production output compared to the previous month in December for the first time following three months of strong declines. However, the increase was small only, as the order situation is still declining in spite of a clear improvement," Mr Bruckbauer says. The number of new orders has been declining for about six months. The pace of decline was small in December both with regard to new orders in domestic business and from buyers abroad. Thanks to stronger demand from some European markets, producers of investment goods were even able to record a slight order increase. As the order development was still moderate, it caused, on the whole, an overcapacity of the domestic industry. Therefore, the backlogs of work declined considerably in December, too.

Due to the continued demand weakness, job cuts in the Austrian industry continued in December at nearly the same pace. In 2014, the amount of employees in the manufacturing industry (NACE code manufacturing) declined by about 800 persons to an average of 582,500 for the first time in four years. "The situation on the labor market of the domestic manufacturing industry, however, is still good by comparison," Bank Austria Economist Walter Pudschedl stresses, and adds, "In spite of the employment decline and the increase of unemployed to more than 29,000 in 2014, the unemployment rate of 4.8 percent is clearly lower than the rate in the overall economy, which climbed to an annual average of 8.4 percent."

In December, the slump of crude oil prices was the main cause for the strongest decline of input prices in eight months. In addition to fuel and energy, many plastic and metal materials became cheaper, too. Due to strong competition, however, output prices had to be reduced as well. "The strong price slump of crude oil by nearly 20 percent compared to the previous month as well as other price declines for primary materials were not passed on to customers completely, resulting in a slight average improvement of the profit situation of domestic industrial enterprises in December," Mr Pudschedl summarizes.

"Due to the moderate growth tendency until summer, we expect a real production plus of 1 percent on average in 2014 of the Austrian manufacturing industry in spite of the slump as from autumn. The automotive industry recorded an above-average result with 4 percent, and the enterprises of the electric and chemical industries achieved relatively strong growth with up to 3 percent as well," Mr Bruckbauer says. The current Bank Austria Purchasing Managers' Index with its strong increase compared to the previous month, based on an improvement of all individual components, is now sending a more positive economic signal for the first time since summer. The situation of the Austrian industry is beginning to stabilize and the framework conditions for a slight recovery next year are favorable. The lower oil price and the weaker euro are making it easier for the domestic industrial enterprises to make use of a revival of the global industrial development. Respective signs have increased in December, as the preliminary Purchasing Managers' Index for the euro zone is showing a slight upward tendency and has risen slightly above the growth threshold with 50.8 points. Particularly the improvement of the order situation, both from the euro zone and abroad, gives rise to expectations of recovery. For the Austrian industry, the further increase of the German Purchasing Managers' Index to 51.2 points in particular can be considered a positive sign, while the cautious optimism is also backed by the most recent increase of the Ifo Business Climate Index. "We assume that demand for "Made in Austria" will strengthen at the beginning of 2015 and the order situation of Austrian investment good branches will improve. Provided that framework conditions will continue to be favorable, like low interest rates and commodity prices, and that the Ukraine crisis will not escalate, the Austrian industry will slowly return to the long-term growth path of about 3 percent in 2015," Mr Bruckbauer says, showing slight optimism.

Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 50505 - 41957;
E-Mail: walter.pudschedl@unicreditgroup.at

Note: Levels of the PMI above 50.0 are a sign of growth compared to the previous month. Levels below 50.0 are a sign of decline. The farther the levels are away from 50.0, the stronger the growth or decline tendencies. This press release contains the original data from the monthly survey among purchasing managers of the Austrian industry, which is sponsored by Bank Austria and has been carried out by Markit Economics since October 1998 under the auspices of the ÖPWZ.