Bank Austria Purchasing Managers’ Index for October:
Pace of Austria's industrial growth increases

  • Industry accelerates again: Bank Austria Purchasing Managers' Index climbs to 53.0 points in October
  • Clearest production expansion of the year after noticeable improvement in orders
  • Industry creates new jobs again: strongest employment growth in 3½ years
  • Sharply falling input prices encourage earnings
  • Austrian industry continues to move cautiously in face of global economic risks: careful inventory management and restraint in purchasing

With the momentum of the recovery in Europe, the industrial sector in Austria has improved since the beginning of autumn. "Austrian industry has been growing for half a year now. The current Bank Austria Purchasing Managers’ Index shows that after the very modest upward trend in the summer, the industrial sector is now livelier. With the rise to 53 points in October, the indicator has reached its highest point in almost two years", said Bank Austria chief economist Stefan Bruckbauer. In October, the indicator, which was determined via a monthly survey of Austrian purchasing managers, exceeded the long-term average and reveals a satisfactory start for Austria's industry in the fourth quarter of 2015. "Due to the continuing improvement of orders from home and abroad, Austrian industrial enterprises noticeably increased production in October. New jobs were created and earnings also improved thanks to falling commodity prices. But the persistently cautious approach to inventory management signals, among other things, that Austrian industrial companies will continue to be prudent for the time being in the face of global economic uncertainty", said Bruckbauer, summing up the important results.

A further increase in production was the main driver for the increase in the Bank Austria Purchasing Managers’ Index at the beginning of the last quarter of 2015. "New and follow-up orders have not grown this strongly for two years. Consequently, Austrian companies raised their production levels significantly in October. An increase in orders from abroad contributed to this trend almost as much as the rising domestic demand", summarised Bank Austria economist Walter Pudschedl. The additional orders could not be processed with existing production capacities, so the backlog has increased significantly. Notwithstanding the continuing improvement in demand, purchasing volumes were reduced at Austrian industrial firms. Global economic uncertainties brought on by the weaknesses of the emerging countries were also very much reflected in a very cautious, and very cost-conscious inventory policy. Warehouse inventories dropped more sharply than in the previous month.

In October, the recovery of industry also had a positive impact on the labour market. "The ongoing job cuts since 2012 in the manufacturing sector have come to a standstill; new jobs were created. At a reading of 51.8 points the current employment index is heading noticeably upwards for the first time in 3½ years", stressed Pudschedl, before adding: "The current order trend leads us to expect at least a moderate increase in industry employment in the coming months, from its present, seasonally-adjusted level of just under 580,000". While production output in real terms is already higher than pre-crisis levels, employment in Austrian goods manufacturing is still around 25,000 or more than 4 percent below the peak before the outbreak of the crisis in 2008.

Domestic industry once again clearly benefited in October from a tangible reduction in commodity prices, especially crude oil. With only a slight change in output prices on average, the sharp reduction in input prices compared to the previous month eased the pressure on costs and earnings at Austrian industrial companies, according to Bank Austria’s economists.

After Austrian industry had fallen behind the pace of the European recovery for a long time, the domestic production sector has demonstrated faster growth momentum again at the beginning of Q4 2015 for the first time in two years – currently even higher than in neighbouring Germany, whose Purchasing Managers’ Index was recorded at 51.6 points in October. The "new orders to stock" relation indicates a continuation of the industrial recovery for the coming months. For over half a year, this ratio has been higher than 1 and rising, which signals that the strength of demand, taking existing inventory capacity into account, is expected to lead to further production increases compared to the previous month. "The slowdown of global trade as a result of the economic slowdown in China among other places will affect Austrian industry, but the good performance in many eurozone countries and the advantages provided by the weaker euro can compensate for this. So we expect that Austrian industry will remain on a solid growth trajectory over the coming months and may bring with it a production increase of around 2 percent for 2015 as a whole", said Bruckbauer.

Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 5 05 05-541957;
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.