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29.01.2016

Bank Austria Purchasing Managers' Index for January:
Austria's industrial production increases in early 2016

  • Industry enjoys dynamic start to the new year: Bank Austria Purchasing Managers' Index climbs to 51.2 points in January
  • More orders ensure major production expansion
  • Sharp decline in price of commodities boosts earnings
  • At the same time, production not at full capacity, too few new jobs being created and ongoing economic uncertainties leading to targeted cost and inventory optimisation

Austrian industry has had a great start to 2016. "The Bank Austria Purchasing Managers’ Index rose to 51.2 points in January. After a slight dip in the previous month, domestic industry continued on its growth trajectory at the start of the year in dynamic fashion, and has almost caught up with the higher pace of growth in Europe", says Bank Austria chief economist Stefan Bruckbauer. The Austrian indicator approached the 52.3 points reached by the preliminary purchasing managers' index for the eurozone in January. In contrast to the development in Austria, the European index has fallen slightly since the previous month due to declining figures in the core countries of Germany and France. In 2015 the Bank Austria Purchasing Managers' Index stood on average 1.5 points lower than its European counterpart, though since then, its domestic industry has been on an upward trend for the tenth month in a row. "The somewhat faster upward trajectory of Austrian industry in January has been marked by increases in production, orders and employment. In addition, industry has benefited from sharp declines in the price of commodities. The ever cautious assessment of business in companies remains reflected in the particularly cost-conscious inventory management," says Bruckbauer, discussing the most important individual results of the monthly survey among Austrian purchasing managers.

The improvement in the Bank Austria Purchasing Managers' Index at the start of 2016 is primarily the result of the significant expansion in production. "The production index climbed to 54.2 points in January, primarily driven by growth in the capital goods sector. But January also saw greater production in the intermediate goods industry, as the order situation had further improved since the previous month", summarised Bank Austria economist Walter Pudschedl. After the marginal declines in December, Austrian industrial companies were again able to acquire more new business. That said, foreign demand for Austrian industrial goods, particularly from Europe, was weaker in January.

The growth in new orders was made possible in part by the granting of discounts. January marked the fourth month in a row that Austrian industrial companies made a noticeable reduction in their average sale prices. At the same time, industry benefited from a further sharp fall in the price of some commodities. The downward price trend for crude oil and steel in particular led to cost savings in many companies. "On average, the cost savings in purchasing resulting from the fall in the price of some raw materials in January were not passed on fully to the customer. For Austrian businesses, the price trends in purchasing and sales at the start of the year made a moderate or better improvement in the cost and earnings situation possible," analysed Pudschedl.

Despite the large expansion in production at the start of the year, the available capacity is still not fully exploited. This is indicated not only by the second decline in orders in a row, but primarily by the number of employees. At just shy of 580,000, the average employment numbers over 2015 were almost 3,000 or half a percent below the previous year's level. More new positions have been created in manufacturing since autumn, but the willingness to take on new employees remains subdued at the start of the year. The employment index is just barely in the black and fell further in January to 50.8 points. "The uncertainty felt by Austria industrial companies when it comes to assessing their business prospects is once again palpable in early 2016. This is shown not only in the cautious planning of personnel capacities, but also in targeted inventory optimisation to reduce costs," says Pudschedl. Purchasing volumes remained at a constant level despite higher production output and a slight improvement in orders placed. Stocks of primary materials as well as semi-finished and finished goods decreased noticeably as a result.

The Bank Austria Purchasing Managers' Index displays a slight improvement in industrial activity in early 2016. The recovery of the Austrian manufacturing sector is holding strong, which is also confirmed by the rise in the "new orders to stock" index. Current demand is expected to lead to further month-on-month rises in production over the coming months, taking inventory stock into account. "Austrian industry has seen a slight improvement at the start of the new year. However, industrial activity is suffering from a lack of export orders and the rather weak domestic demand. Following growth of just over two percent in 2015, industrial production in Austria is expected to get back on track for its long-term growth path of three percent in 2016," expects Bruckbauer.

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.