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26.02.2016

Bank Austria Purchasing Managers' Index for February:
Austrian industry defies market turbulence and economic worries

  • Industry keeps growing: Bank Austria Purchasing Managers' Index climbs to 51.9 points in February
  • Strongest production increase in two years thanks to growth in Austrian and international orders, but employment barely rises in February
  • Decline in commodity prices improves earnings position of Austrian industrial companies
  • Austrian industry currently growing faster than Europe

In spite of the recent turbulence on the market and the growing economic concerns, Austrian industry is in good shape at present. "Austrian industry has been enjoying an upwards trend for roughly a year now. The increase in Bank Austria’s Purchasing Manager's Index to 51.9 points in February shows that following a dip before the turn of the year, growth has picked up again since the start of 2016", said Bank Austria chief economist Stefan Bruckbauer. Despite the tense mood on the markets, Austrian industry is still providing good real economic data. "The higher demand for Austrian industrial goods prompted domestic companies to expand their production levels markedly in February. The thicker order backlog and the higher output prices are also indicative of the good industrial activity at present. This is offset, however, by the slower increase in employment and the very cautious inventory management, which suggests companies’ business expectations are guarded", added Bruckbauer, summarising the main results of the monthly survey among Austrian purchasing managers.

The increase in the Bank Austria Purchasing Managers' Index in February is due largely to higher production output driven by improved orders. "After two weaker months, Austrian industrial companies managed to record an increase in new and follow-up orders again in February. Most of this demand was in Austria, but external demand picked up too. This meant production at companies was ramped up faster than we have seen in roughly two years", said Bank Austria economist Walter Pudschedl. The production index reached 55.1 points, its highest level since January 2014. Nonetheless, the order backlog rose in February as production capacities are insufficient.

Bolstered by the additional orders, Austrian industrial companies were able to increase their output prices marginally in February. "For the first time since mid-2014 the improved demand resulted in higher output prices. At the same time, the continued, sharp decline in prices for commodities and primary materials is good for purchasing conditions. For the sixth month in a row, input and output price trends have improved the cost and earnings position of most Austrian companies", analysed Pudschedl.

In contrast to the positive survey data on the current position of Austrian industry, Austrian companies remain very cautious about their future business prospects. This is particularly reflected in personnel and inventory management. Although we saw an increase of capacity-in-use within Austrian industry thanks to the upwards trend in production, employment barely rose in February. The pace of employment growth in February was the lowest recorded in the last six months of constant positive development. In terms of inventories, the cost optimisation trend seen for the last eighteen months continued with a reduction in stocks. Yet both stocks of purchases and finished goods were reduced somewhat more slowly in February than in previous months.

The latest Bank Austria Purchasing Managers' Index displays a slight improvement in industrial activity in February. Orders from Austria and abroad picked up, production underwent significant expansion, employment managed to post at least marginal growth and Austrian enterprises benefitted from the current price trends. Sitting at 51.9 points, the Bank Austria Purchasing Managers’ Index in Austria has beaten its European counterparts for the first time in months, most of which deteriorated somewhat in February, in contrast to the trends in Austria. The preliminary purchasing managers' index for the eurozone dropped to 51.0 points, pulled down particularly by the German indicator.

Industry bears up so far in face of uncertainty
In spite of the weaker purchasing managers' indices in many European countries in February, European industry is still growing. Yet given the strained sentiment seen for example in the recent sharp decline of the German IFO business climate index, it must be asked whether the turbulence on the financial markets and the geopolitical events will have negative effects on the real economy. “Both Austrian and European industry as a whole is currently in rude health. Real economic data has yet to really react to the deterioration in sentiment following the turbulence on the financial markets. But the longer the uncertainty and the geopolitical problems persist, the greater the likelihood we will see negative impacts seeping through to the real economy”, concluded Bruckbauer.

 tables (PDF; 197 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.