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29.01.2015

Bank Austria Purchasing Managers' Index for January:
Still waiting for industrial upswing

  • Bank Austria Purchasing Managers' Index falls slightly to 48.5 points at start of year
  • Austrian industry currently unable to keep pace with upturn in European industry
  • Reasons include the subdued demand from Austria and abroad with the resultant decline in production output, the EU sanctions against Russia and the consequences of the Ukraine crisis which particularly affect Austria
  • Slump in oil price boosts corporate earnings
  • No immediate improvement in sight, but lower oil price and the weaker euro will enable return to growth in coming months

While industrial activity is slowly improving in Europe, Austrian industry is not yet in the best of form in early 2015. "Bank Austria’s Business Indicator fell to 48.5 points in January. This means it lies below the threshold indicating growth in the local economy, and for the fifth month in a row", revealed Bank Austria chief economist Stefan Bruckbauer. By contrast, the situation in the eurozone has continued to improve. The provisional Purchasing Manager's Index for the eurozone rose to 51 points in January, which puts it at its highest reading for six months and preserves a moderate upwards trend in industry that has been underway since mid-2013. "The recovery in eurozone industry is making slow progress. But Austrian industry, by contrast, is not making any headway. The reasons for this include the very subdued demand from Austria and abroad as well as the strong trade ties with CEE, which means Austrian industry is more strongly affected by the EU sanctions against Russia and the consequences of the crisis in Ukraine. The positive impetus from neighbouring western states, such as Germany, is still too weak to push Austrian industry back on to a growth path", said Bruckbauer, summarising the situation.

The extremely moderate demand is one of the greatest challenges for Austrian industry, and the order situation even worsened in January once again. Fewer new orders were received both from Austria and abroad. "In light of the decline in demand for products and services "made in Austria", Austrian industrial companies noticeably scaled their production output back in January. The production index sank to 48.6 points", added Bank Austria economist Walter Pudschedl. Adjusting production capacities to the dwindling development in orders clearly did not take place quickly enough, because the surplus in capacity only widened for Austrian industry in January. Order backlogs dropped sharply at the start of 2015, at a pace last seen 1¾ years ago.

The plunge in commodity prices, particularly oil but also for a range of metals, pushed the average input prices down significantly for Austrian industrial companies. "Input prices dropped faster in January than ever seen before since the financial crisis in mid-2009. The lower costs of primary materials resulted in output price reductions in January, albeit to a smaller extent. All told, therefore, the price trends produced a modest improvement in the earnings of Austrian industrial companies compared to the previous month", analysed Pudschedl. In light of the weak demand and the prospect of further price falls, Austrian companies also noticeably reduced purchasing quantities in January. This resulted in a clear contraction of stocks of purchases. Stocks of finished goods were also reduced with a view to pursuing a cautious inventory policy. Austrian industrial companies are currently very reserved with their assessments of future business development.

Bucking the pan-European trend, Austrian industry is displaying no signs of any upwards movement at the start of 2015. Bank Austria’s latest Purchasing Managers' Index is once again contracting in January. The decline in new business means that the immediate prospects for Austrian industry are quite subdued. The correlation between new orders and inventories is down on the previous month and now in negative territory. "There is currently no sign of any imminent improvement in industrial activity in Austria. Data from Europe, however, such as the latest IFO business climate index, suggests that Austrian industry will follow the modest upwards trend in Europe supported by the weaker euro and the low oil price in the coming months", said Bruckbauer in conclusion.

 Charts (PDF; 25,3 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.