Bank Austria Purchasing Managers' Index in November:
Austria's industry gaining significant momentum
- The Bank Austria Purchasing Managers' Index increases to 55.4 points in November, reaching its highest value for over five years
- Growing demand for exports, increased rate of production expansion
- Greatest increase in employment since 2011
- 2016 growth forecast for industrial production raised from 2 to 2.5 per cent, but uncertainty clouds the outlook for 2017
The economic situation for the industry in Austria is picking up considerable speed just before the turn of the year. "The relatively moderate rate of recovery in the industry over the past two years noticeably picked up pace towards the turn of 2016. In November, the Bank Austria Purchasing Managers' Index rose by 1.5 points compared to the previous month, peaking at 55.4. This means that the indicator reached its highest value for over five years", states Chief Economist at Bank Austria, Stefan Bruckbauer. Given the uncertainty relating to the issue of Brexit, industrial recovery showed itself to be astonishingly robust in recent months and is now looking even more dynamic following the surprising outcome of the election in the USA. "Domestic industrial companies gained significant momentum from outside Austria in November. The obvious improvement in the order situation led to in expansion in production, which required more personnel", explains Bruckbauer. The upward trend in the industry was also felt in the current price and stock trends.
The massive expansion of production in particular reflects the improvement of the economic situation in the domestic industry in November. “The accelerated rise in production output by Austrian industrial companies just before the end of the year is a direct consequence of markedly increased demand. The improvement in the economic mood over the past months provided the ideal conditions for a larger number of new orders from Austria. In addition, an increase in new orders from abroad was also experienced in November in particular”, states Economist at Bank Austria, Walter Pudschedl. The order books filled up with new orders from abroad at a rapid rate that had not been experienced for around two years. Given the dynamic development of new and follow-up orders, it was not possible to adapt production capacity fast enough, with the result that there was a noticeable increase in order backlogs.
In view of the improved situation in terms of demand, domestic industrial companies adapted their personnel capacity to meet the increased production requirements. Since the middle of this year, new jobs have been created in the industry every month. In November, employment even increased at the quickest rate for over five years, compared on a monthly basis. "Thanks to the significant increase in employment in the second half of the year, and particularly just before the end of the year, more people will be employed in the industry in 2016 compared to the previous year, with an average of 593,000 people working in this sector. After two successive years where employment dropped, new jobs have been created again in the industry for the first time, although the increase remains significantly lower than the strong growth of 1.4 per cent in the economy as a whole", considers Pudschedl. The importance of the industry for the overall economy as an employer is therefore continuing to wane, to the benefit of the service sector.
The momentum in the industry is noticeably reflected in the current price trends. "Increasing demand has made many primary materials and raw materials, including oil, more expensive. The cost burden, which could be felt even a few months ago by domestic industrial companies due to increasing input prices, became even more pronounced in November", explains Pudschedl. However, despite tough competition, producers were able to slightly raise output prices for the first time since spring.
Austrian industrial companies were clearly somewhat taken aback by the strength of the economic momentum experienced in November. Although the quantity of purchases rose significantly, the high production requirements caused a considerable reduction in the stocks of primary materials. The stocks of finished goods also dwindled faster than before, but the average suppliers' delivery times saw a huge increase.
The moderate upward trend which took hold in the Austrian industry at the beginning of 2015 noticeably picked up at the end of 2016. The current survey results from Austria's purchasing managers contain only positive economic signs, and the ratio between new orders and existing stock also indicates that the high level of demand is likely to lead to further increases in production compared to the previous month, taking into consideration the storage capacity available. The strong vital signs of export demand are looking particularly optimistic. The economic situation for the industry is now not only benefiting from domestic demand for investment but, for the first time this year, also noticeably from new export orders, meaning that the good recovery rate exhibited by the sector should continue as we move from 2016 into 2017.
"In view of the acceleration of the growth rate in the industry towards the end of the year, we are now expecting a considerably higher increase in production for 2016 as a whole, compared to the previous year. We have increased our growth forecast for the industry from 2 to 2.5 per cent in real Terms", states Bruckbauer. Despite the ongoing uncertainty in the wake of the Brexit decision in the UK and the surprising election result in the USA, Bank Austria economists are taking an optimistic view of the growth prospects for Austrian industry going into 2017.
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Enquiries: Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 5 05 05-41957;