UniCredit Bank Austria Business Indicator:
Extended economic upswing

  • A further increase in the UniCredit Bank Austria Business Indicator to 3.8 points in September indicates a sustained high rate of growth in the Austrian economy
  • The highest GDP increase for ten years can be expected: Economic growth increasing to 3% during 2017
  • Economic growth in Austria, at over 2% in 2018, is again higher than in the Eurozone or in Germany
  • Unemployment rate falls to 8.6% in 2017 and further to 8.4% in 2018
  • Inflation at 2% in 2017, higher than in the Eurozone for the ninth year in succession

After strong growth (2.9%) in the first half of 2017 compared with the previous year, the mood indicators and early indicators point to a sustained, equally strong economic upswing in the Austrian economy for the autumn. “In September, the UniCredit Bank Austria Business Indicator has improved again after the moderate fall of the previous month. At 3.8 points, the indicator has even climbed to a 10-year high, suggesting an economic growth of over 3% when compared with the third quarter of last year in Austria”, said UniCredit Bank Austria Chief Economist Stefan Bruckbauer. The Austrian economy is continuing to display robust growth, thanks to sustained support from all sectors of the economy. “If anything, optimism in the Austrian economy has increased further during autumn. In September, all components of the UniCredit Bank Austria Business Indicator show at least a very slight improvement compared with the previous month. There is a positive outlook in the service and construction sectors, and the sustained strong upswing in global trade ensures an optimal best mood in our domestic industry”, says Bruckbauer.

The excellent mood supports continuation of the high rate of growth in Austria for the coming months as well. “We are expecting economic growth of more than 3%, not just in the third, but also in the fourth quarter of 2017, compared with the same periods last year. The domestic demand, particularly in terms of investments, is also continuing to carry the economic upswing. Beyond that, the strong and robust support of the domestic export economy is a cause for surprise thanks to global demand. Overall, economic growth in 2017 will break through the 3% mark for the first time in ten years”, says an optimistic Bruckbauer.

Continued investment boom
After the strong impulse by the tax reform of 2016, and thanks to the palpable improvement in the Austrian employment market, private consumption has found itself on a more moderate yet stable path of growth. In addition, neither investments nor exports are showing any signs of weakness. Despite the already lengthy, very dynamic investment cycle, the capacity utilisation of the Austrian economy has, for the first time since the financial crisis, actually exceeded the long-term average, which, carried by the current optimism in the business sector and advantageous interest rates, indicates a continued boom in investment for the time being.

Beyond that, the development of new orders leads us to expect a further upswing in construction investment. The demand from abroad continues to be very strong, and is stabilising at a high level. In addition to the advantage of regional focus on currently dynamically growing trade partner countries, for example the Eastern European growth markets, the Austrian export economy also profits from the sector set-up, which is favourable for current demand, and the high level of competitiveness, which enables strong growth for machine construction and the electronics industry.

Looking ahead to 2018, the large backlogs of work lead to an expectation of strong growth for the Austrian export economy, against an encouraging international background hardly affected by the strong Euro. The economic upswing is expected to sustain itself in many growth markets, particularly in Eastern Europe. In addition, we can expect robust demand from the USA, while widespread recovery in Europe within a context of equally relaxed monetary and political conditions provides tailwind. “While support for growth in the Austrian economy will also result in strong growth for 2018, thanks to foreign trade, we assume that domestic demand will lose some of its momentum. However, at 2.1%, the Austrian economy will also experience strong growth in 2018. For the second year in succession, the increase in GDP will be higher than that of the Eurozone or Germany”, says UniCredit Bank Austria economist Walter Pudschedl.

Unemployment to fall in 2018 also
The good economic development has also been making itself strongly felt in the employment market. The high level of employment growth (1.8%) means almost an extra 70,000 jobs in 2017, leading to a decrease in unemployment, despite the sustained strong growth in workforce potential. In 2017, the unemployment rate will fall for the first time since 2011, to an average of 8.6%. This positive trend should also continue in 2018 – albeit at a slightly decreased level. According to estimates by economists at UniCredit Bank Austria, the unemployment rate will fall to 8.4%.

Inflation in Austria still noticeably higher than Eurozone average
After the upward trend based on oil prices at the start of the year, inflation has stabilised at around 2%. The predicted average inflation for 2017 will also be 2%, since the good economic development, at least in some areas, is also having an impact on inflation. While the increase in the price of goods, also somewhat dampened by the strong Euro, is proving to be very moderate, there is a perceptible, demand-related rise in prices in some services, such as tourism, leisure and cultural activities.

In addition, rents are continuing to rise sharply above the average. “In the first nine months of 2017, the harmonised consumer price inflation in Austria (2.1%) is substantially in excess of the inflation level of 1.6%. in the Eurozone. Due to a somewhat lower upward pressure in the oil price, supported by a strong Euro, inflation will fall slightly in 2018. With an average of 1.9%, the impact compared with that in the Eurozone, for which we expect to see a fall in inflation to 1.4%, will remain as it currently is, however”, claims Pudschedl. Since the financial crisis, inflation in Austria has remained above the reference value for the Eurozone.


Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel. +43 (0) 50505 - 41957;
E-mail: walter.pudschedl@unicreditgroup.at