Bank Austria Purchasing Managers’ Index in July:
Unfazed by Greek chaos, industrial activity picks up pace in Austria

  • Bank Austria Purchasing Managers’ Index on upwards trend: highest reading for eighteen months reached in July, 52.4 points
  • Improved order situation triggers noticeable expansion in production
  • New jobs created in industry for first time in nearly a year
  • Yet rising input prices squeeze earnings of Austrian companies
  • Upturn in Austrian industrial activity still supported by positive figures from Europe

Following a weak start to the year and the first positive signs in the spring, the upswing in Austrian industry is now gaining momentum. "Bank Austria’s Purchasing Managers' Index recorded tangible growth in July. At 52.4 points the indicator has reached its highest reading for roughly eighteen months and is now growing faster than the long-term average", revealed Bank Austria chief economist Stefan Bruckbauer. The recovery in Austrian industry is taking root. Bank Austria’s Purchasing Managers’ Index has been growing for the fourth month in a row. "Austrian industrial companies ramped their production up considerably in July. The improved order situation and the faster increase in the order backlog prompted businesses to take on new staff again. That said, higher input prices are squeezing earnings", said Bruckbauer, summarising the main findings of the monthly survey among Austrian purchasing managers.

The market climate improved at the start of the second half-year. "Austrian industrial companies noticeably received more new and follow-up orders in July both domestically and from abroad. In spite of a minor decline compared to the previous month, export demand is still exceptionally high. Capital goods in particular emerged in a better shape in terms of orders, where production was also expanded significantly", said Bank Austria economist Walter Pudschedl. The production index reached 54.1 points in July, its highest level in roughly eighteen months. Order backlogs increased in light of the good demand, despite the sharp rise in production.

Employment in the sector during the first six months had fallen 0.6 percent yoy to approximately 580,000. Roughly 3,500 jobs were lost over this period. "But after almost one year the fall in jobs in Austrian goods production has come to an end. Demand for workers has picked up in particular in the capital goods producing segment. Although the increase in employment was very low overall, the light at the end of the tunnel is getting brighter", added Pudschedl.

The improvement in industrial activity resulted in a trend reversal for input and output prices. The growth in prices for raw materials and primary materials increased in July. Currency effects coupled with the demand-driven increase in certain raw material prices caused average input prices to rise faster than they have done in almost a year. However, the fierce competition meant that these higher costs could not be channelled into output prices. The prices which were reduced in previous months amidst weak demand remained largely stable in July. "The latest increase in input prices with barely any change in output prices exerted pressure on earnings in Austrian industry on average", said Pudschedl.

Economic concerns in the emerging markets, especially China, are currently weighing down on the prospects for industrial activity. The purchasing managers’ index for Chinese manufacturing has been below the growth threshold of 50 points since March. The low prices for raw materials and the most recent decline in the oil price after the agreement reached with Iran are posing additional challenges for some growth markets. By contrast, the outlooks for industrialised countries remain very solid. The provisional US purchasing managers’ index increased marginally to 53.8 points in July, but the recovery is taking root above all in Europe. The eurozone’s purchasing managers’ index in July came in at 52.2 points, and therefore despite the headwind caused by discussions on Greece and the Russia/Ukraine crisis it has been comfortably above the long-term average for five months, still supported by the German economy, as underlined by the recent increase in the IFO business climate index. "Following in the wake of the favourable climate in Europe, Austrian industry is now gaining some momentum after a slight delay. In the first half year, industrial production in Austria rose by an average of 1.5 percent in real terms. A modest acceleration is on the horizon for the coming months. This is why we expect a rise of 2 percent in Austrian industrial production for 2015 as a whole", forecasts Bruckbauer.

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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.