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26.04.2018

UniCredit Bank Austria Purchasing Managers’ Index in April:
Austrian industry continues its strong growth trajectory, with the pace of growth stabilising in April

  • Having dropped steadily since its all-time high at the end of last year, the UniCredit Bank Austria Purchasing Managers’ Index settled back at 58 points in April
  • Despite a pronounced drop in order growth, production output in Austrian companies is accelerating
  • Job creation rates in April have hit their highest level so far this year
  • Cautious approach to purchasing and inventory management as a result of uncertainties in trade policy and geopolitical tensions
  • Despite the slowdown in industrial activity, growth in output is set to increase by 4.5 per cent in 2018, slightly ahead of the 2017 figure

In spite of growing uncertainty due to an increasing trend towards protectionism in global trade, Austrian industry continued its strong growth trajectory at the start of the second quarter of 2018. "The steady drop in the UniCredit Bank Austria Purchasing Managers’ Index evident during the first few months of the current year did not continue into April. Closing at 58 points, and unchanged compared to the previous month, the indicator points to a continued strong upward trend within domestic industry. However, some of the results of the monthly survey of Austrian purchasing managers point to an impending slowdown in industrial activity," explains Stefan Bruckbauer, chief economist with UniCredit Bank Austria. Following the all-time high recorded at the end of last year, the UniCredit Bank Austria Purchasing Managers' Index has since returned to approximately the same level as in spring 2017. The current indicator shows that overall industrial activity in Austria at the start of the second quarter is still showing more momentum than the eurozone. In April, the preliminary Purchasing Managers' Index for the eurozone dropped slightly to 56 points. For over two years running, this index is once again lower than the index for Austria.

"In April, domestic companies experienced stronger growth in production output, and thus took on more staff than in the previous month, although there was a noticeable slowdown in new business during the same period. Rising purchase prices are also placing increased focus on a strongly cautious approach to inventory management," explains Bruckbauer in his summary of the key detailed results.

Sharp decline in order growth
The most striking finding of the current UniCredit Bank Austria Purchasing Managers' Index is the pronounced slowdown in the growth of new business. "Order growth in April declined for the fourth month in a row. In particular, there has been a considerable loss of momentum in international demand. Existing orders are continuing to increase, although at a slower rate than seen over the past year and a half," explains UniCredit Bank Austria economist Walter Pudschedl.

Sustained increase in employment levels
Despite the slowdown in demand, domestic companies increased output at a higher rate than in the previous month. The production index has risen to 56.8 points. Companies have therefore increased staffing levels yet again. The rate of job creation picked up considerably in April. At 62.1 points, the employment index has hit its highest value so far this year. "During the first quarter, employment levels in the Austrian material goods sector increased by more than 3.5% to over 600,000. Unemployment dropped sharply to an average of just 4.2%. In comparison, unemployment also decreased sharply in the economy as a whole, with job numbers increasing by 2.5%. However, this unemployment rate is currently averaging at 8.5%, which is still roughly twice the unemployment rate in industry," explains Pudschedl.

Cautious inventory strategies
In the face of growing economic risks, domestic industrial companies have responded by opting for a more cautious, cost-conscious inventory management strategy. According to Pudschedl, "Purchase volumes in April increased at a significantly slower pace than in the previous month, which can be explained by rising prices on the one hand and lower demand on the other." Rising raw material prices, especially for petroleum, have led to an accelerated increase in average purchase prices. As it was not possible for this rise in costs to be fully absorbed in sales prices, the earnings situation of domestic industrial companies generally disimproved slightly compared to the previous month. In terms of the fall-off in demand, there was a slowdown in the rate at which primary material inventory increased. In parallel, the rate of increase in sales inventories rose slightly.

Positive outlook with increased risk
Industrial activity has now clearly passed its peak. However, the UniCredit Bank Austria Purchasing Managers’ Index stabilised in April, having declined steadily since the start of the year. A number of sub-indicators point to the fact that growth is set to decelerate further in the coming months, although continued strong production increases can be expected. New business in particular is growing at a considerably slower pace than previously, as evidenced by less dynamic growth in export orders especially. The strong position of the euro is having an effect here, combined with increased tensions relating to trade policy issues. The ratio of new orders to existing inventories also deteriorated slightly once more compared to the previous month. However, this indicates that sales inventories are too low to fulfil incoming orders without increases in production. Austrian industrial companies thus remain very optimistic. Although the index for production expectations, which provides an outlook for the next 12 months, reported a further slight decline compared to the previous month, the outlook remains very positive at 63.8 points. "Following a particularly strong start to the year, industrial activity in Austria is now levelling off slightly, due primarily to weaker international demand. All results from individual sections of the current UniCredit Bank Austria Purchasing Managers’ Index point to continued robust growth. We anticipate an increase in industrial output of approximately 4.5% in 2018, which, thanks to the strong start to the year, is slightly higher than the previous year," says Bruckbauer.

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Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0)5 05 05-41957;
Email: walter.pudschedl@unicreditgroup.at