Industry Report by UniCredit Bank Austria:
The metal goods industry increases the growth rate in 2017
- Metal goods manufacture will exceed its increase in production of 3.3 percent from the previous year – both in 2017 and, according to expectations, in 2018 as well
- The sector ended 2016 with sales of EUR 14.7 billion and net sales growth of 2.3 percent
- The high levels of strong competition enabled a significant advance on an international level and an export surplus for metal goods of EUR 1.7 billion
- Currently employing around 71,000 people and continuously expanding, metal goods production is one of the core elements of domestic industry
In the first half of 2017, Austria's metal goods industry gained momentum and will exceed the results of the previous year by the end of 2017. Production in the industry increased by 3.3 percent and sales increased by around 2 percent in 2016, reaching EUR 14.7 billion, due to a slight reduction in producer prices. As the current industry report from UniCredit Bank Austria Economics shows, international sales have once again made a slightly more significant contribution to the industry's results than domestic business this year. "We expect that in 2017, the exports by metal goods manufacturers, who are closely linked to the construction sector and whose turnover stagnated last year, will be able to compensate for the lack of domestic demand in commercial construction. On the other hand, industry suppliers in the sector expect demand in the automotive and electronics sectors to remain high, both domestically and internationally, as this is strengthened by domestic mechanical engineering", explains UniCredit Bank Austria Economist Günter Wolf.
2017's economic recovery will continue in 2018
Between January and April 2017, production increased significantly by 4 percent, as did sales, with a 7 percent rise. This positive economic impression of the metal goods production sector was complemented by the strong rise in employment of 2 percent in the first half of the year and the positive situation regarding orders at the mid point of the year. Austria's metal goods industry benefits from high levels of international demand in particular, which made up 55 percent of sector sales. Up to April 2017, metal manufacturing sales rose nominally by nearly 8 percent in international markets and by 6 percent on the domestic market. In line with the optimistic estimates made by companies, foreign sales increased further in the second quarter. In 2017 and 2018, the sector can expect increased economic growth in the important sales markets in Italy and France, and in Poland, the Czech Republic and Hungary in particular. In the largest export market – Germany, where one third of metal goods exports are sold – the construction industry is expected to generate stronger demand impulses in both years. The German capital goods sector, however, is not expected to gain momentum until 2018, when it will provide domestic metal goods manufacturers with additional new export orders.
Overall, this favourable economic situation will encourage demand for metal goods in 2017 and 2018. This means that the sector can expect production growth of at least 4 percent on average over the year, which corresponds to its long-term level of growth.
Successful exports prove that metal goods manufacture is a strong competitor
Austria's metal goods production sector is not only growing more quickly than the industry in general; it is also growing significantly faster in the long term than the majority of its EU competitors. Over the past twenty years, the sector's production output in Austria has increased by an average of 4 percent each year – in the EU, this figure is on average just 1 percent. Traditionally, Austria is one of the strongest European locations specialising in metal goods production – its share of the value created by this industry is almost 11 percent. For comparison, the average in the EU is 10 percent.
The excellent performance of Austria's metal goods production industry can be put down to the fact that, on the one hand, the sector benefits from the high levels of international competitiveness exhibited by a number of large leading companies which specialise in high-quality niche markets and are able to establish a stable position on the market. On the other hand, close interrelationships between suppliers and the industrial growth leaders – primarily in the automotive industry and mechanical engineering – guarantee high levels of demand. The successful growth of this sector can also partly be explained by the specific features of its products. Metal goods are essential to the economic process and are often not interchangeable; additionally, it is frequently not profitable to transport them over long distances. Moreover, the high proportion of service provision in some fields makes the situation more difficult for competing imports, for example in the case of building fitters.
The foreign trade surplus in metal goods has risen almost continuously since the second half of the 1990s, demonstrating the competitive strength of the Austrian industry. The following product categories were significant contributors to the export surplus of EUR 1.7 billion in 2016: Fittings and other metal goods (EUR 1.4 billion), weapons and ammunition (EUR 350 million) and steel or aluminium construction elements (EUR 150 million). "The high export surpluses in the metal fitting and steel or aluminium element categories are particularly noteworthy in light of the high cost levels in the country and the fact that these product categories are faced with stronger competition when it comes to their price than their quality", says Wolf. There was an shortfall in exports for product categories with relatively low product values in particular, such as screws, nails and household items; these products registered a loss of EUR 440 million.
Metal goods production is one of the core elements of domestic industry
On an international level, metal production in Austria is not just impressive in terms of its high growth rates. When it comes to productivity, Austria’s metal goods manufacturing industry is third in Europe, behind Switzerland and the Netherlands, with a value creation per employee value of EUR 71,000. The average value for this indicator in the EU is EUR 46,000 – around two thirds of the figure recorded in Austria.
Austria's metal goods production industry is reinforced by the employment figures in the sector, which are increasing at an above-average rate. With around 71,000 employees, the industry was not only the second largest industrial employer in Austria in 2016, second only to the mechanical engineering sector – it was also one of the most dynamic industrial fields. Over the last twenty years, the number of employees in the industry has risen by an average of 1 percent per year, whilst the proportion of jobs lost each year in the industry was just 0.1 percent. "The fact that the number of people employed in metal goods production has risen continuously in the long term, even in years in which we saw weaker growth, completes the image of a sustainable trend in the sector's development and establishes it as a reliable employer", Wolf emphasises.
Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0) 50505 - 41954