UniCredit Bank Austria - economy: federal state analysis for the first half of 2017:
Diversified regional growth in Austria
- High economic growth in the first half of 2017 in all states thanks to favourable global economic activity and strong domestic demand
- Industrial strongholds of Upper Austria and Styria enjoying the greatest benefit from economic momentum in the most important export markets
- Continuing improvement in the construction industry provided the greatest impetus in Vorarlberg, Burgenland, Tyrol, Carinthia and Vienna
- Several services sectors proved to be stable pillars of growth, whereby Carinthia, Styria and Vienna enjoyed the greatest benefit
- In 2017, all Austrian states will record higher economic growth than in the previous year, with Styria and Upper Austria taking the lead
- The unemployment rate will fall in all Austrian states in 2017, whereby Tyrol and Styria are set to record the greatest drop
With a real GDP increase of 2.9 percent in comparison to the previous year, Austria recorded the strongest first half of the year since 2011. “Alongside the high level of domestic demand, the strong momentum of the Austrian economy can largely be attributed to the reinvigorated overseas demand as a result of healthy international economic activity. Given these favourable framework conditions, all Austrian states should be able to display stronger economic growth in 2017 than in the previous year”, comments UniCredit Bank Austria Chief Economist Stefan Bruckbauer. Those states with a high export quota will enjoy the greatest benefit from the more favourable global economic environment. The construction industry is booming in all Austrian states, with growth rates in production output in the double digits in some areas. Many tourist regions have also set new records for overnight stays.
High level of overseas demand favours industrial regions
The industrial regions with a high export quota enjoy an above average benefit from the pronounced increase in overseas demand. The economists at UniCredit Bank Austria are anticipating a year-on-year increase in visible exports of around eight percent to EUR 140 billion throughout Austria for 2017. “Those states with a high export quota, such as Upper Austria, Styria and Vorarlberg, are particularly delighted by the export boom we have seen this year”, comments UniCredit Bank Austria economist Robert Schwarz. “Styria and Upper Austria are also likely to take the lead in terms of economic growth for 2017, at 3.6 percent and 3.5 percent respectively.” The westerly states of Tyrol and Vorarlberg will also record above-average growth, followed by Burgenland, Carinthia and Lower Austria with around the anticipated national increase of 3 percent. Vienna and Salzburg, the two states with the largest services sector share in total added value, are bringing up the rear with a growth rate of over 2.5 percent. At 2.6 percent, Salzburg recorded the weakest economic growth in 2017, yet still enjoyed a greater increase than the two frontrunners from the previous year, Vorarlberg and Burgenland, both of which recorded growth of 2.4 percent in 2016.
Strong growth in industry
Austria's domestic industry increased its real added value by 5.8 percent in the first half of 2017 over the same period in the previous year. With a share of around 22 percent of total added value, Austrian industry was able to contribute 40 percent to total growth in Austrian added value in the first half of the year. The economic tailwind provided by industry was particularly strong in Carinthia, Lower Austria, Tyrol, Styria, Upper Austria and Vorarlberg. When examined by sector, the metal industry, the engineering sector and the electronics industry made the greatest contribution to the positive economic development in terms of manufacturing.
Construction boom in all Austrian states
Added value in the construction industry increased by over 4 percent in real terms throughout Austria in the first half of 2017 when compared to the same period in the previous year, whereby all Austrian states were able to record significant gains. Vorarlberg, Burgenland, Tyrol, Carinthia and Vienna enjoyed an above-average benefit from the healthy situation in the construction industry. With the exception of a slight decrease in terms of civil engineering production output in Salzburg, Vienna and Styria, all three sub-sectors – structural engineering, civil engineering, the construction industry – made a positive contribution to overall growth in the individual states.
Services sector makes below average contribution to growth
Having contributed more than 70 percent to the year-on-year increase in Austrian added value in the previous year, the services sector contributed less than 40 percent in the first half of 2017. Tyrol, Burgenland, Salzburg and Vienna enjoyed exceptional benefit from the 2.5 percent total increase in added value throughout Austria in the service sub-sector of trade, transport and catering. The sub-sector focussing on providing technical and other economic services such as recruitment agencies, architecture and engineering offices and research & development operations proved themselves to be stable pillars of growth that primarily benefited Styria, Carinthia and Vienna.
“The relative weaknesses of the tertiary sector in the first half of 2017 meant that total growth in the service-oriented states of Salzburg and Vienna was below the Austrian average”, comments Schwarz.
All Austrian states recording falling unemployment rates
The recovery in the Austrian employment market, which began in the second half of 2016, continued in 2017. The economists at UniCredit Bank Austria are anticipating an average drop in the Austrian unemployment rate to 8.6 percent for 2017, following a rate of 9.1 percent in the previous year. “For the first time since 2007, all Austrian states will be able to record a drop in the unemployment rate in 2017”, predicts Schwarz. “This highlights once again the regional diversity of Austrian economic growth.”
The percentage drop in unemployment figures is most pronounced in Tyrol and Styria. However, Salzburg is still likely to have the lowest unemployment rate in Austria at 5.4 percent, with Vienna at the other end of the scale with 13.1 percent. Examined by sector, the unemployment rate is also falling across the board, primarily in the construction sector, trade and industry, catering and public administration. The economists at UniCredit Bank Austria are anticipating a year-on-year increase of 1.8 percent in the number of non-self-employed persons throughout Austria for 2017. Tyrol and Styria will see the greatest increase in the numbers of employees at just over 2 percent.
Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
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