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27.06.2018

UniCredit Bank Austria Purchasing Managers’ Index in June: Austria's industry with less momentum - but no signs of a cyclical slump

  • The UniCredit Bank Austria Purchasing Managers' Index suffered the fifth decline this year in June, but at 56.6 points optimism still predominates
  • Production growth has even accelerated slightly, but employment momentum is slowing downDespite increasing uncertainty for world trade, a small plus for new export orders
  • Even in the medium term, Austria's industry remains optimistic, but the economic risks increase

In addition to the expected decline in the highly dynamic industrial economy of the previous year, the political uncertainties, especially the rapidly increasing trade tensions, should have further accelerated the decline in sentiment in Austria as well. Nevertheless, there are the first signs of at least provisional stabilisation. "Although the UniCredit Bank Austria Purchasing Managers’ Index slowed down somewhat again in June, there are first signs of a stabilisation in the decline, which began in Austrian industry at the beginning of the year, mainly due to slightly higher new export orders," says UniCredit Bank Austria chief economist Stefan Bruckbauer, adding: "However, the impact of the US insecurity on world trade is reflected in less dynamic employment development in the industry."

The current indicator, which after the all-time high at the turn of the year of 64.3 now stands at 56.6, has returned to roughly the level of the end of 2016, showing that the industrial economy in Austria continues to show more momentum in June than in the eurozone as a whole. The preliminary Purchasing Managers’ Index for the eurozone fell to 55.0 points in June, thus falling short of the Austrian value for more than two years.

"Despite the declining sentiment, Austria's industry continued to grow dynamically in June and was even able to regain some growth in production, with the indicator rising slightly from 55.0 to 56.0," says Bruckbauer, summing up an important detailed result.

Slight easing on new export orders after stagnation in May
An important detail of the current UniCredit Bank Austria Purchasing Managers’ Index is the stabilisation of new export orders. The indicator rose slightly from 51.0 to 52.0 in June, allowing it to stabilise the order situation in Austria despite a slight decline in incoming orders from the domestic market after the noticeable decline since the beginning of the year. "In June, momentum in order growth was at least stabilised thanks to a slight increase in new export orders, after foreign demand dynamics had clearly lost momentum in recent months. Backlogs of work continue to rise, albeit at a slower pace than in the past one and a half years,” says UniCredit Bank Austria economist Walter Pudschedl.

Strong job creation continues, but also loses pace
The first effect of the reduced dynamics is shown by the labour market. The pace of job creation declined noticeably in June, but at 57.4, the indicator continues to point to rising employment in industry in Austria. "Since the beginning of the year, employment in the Austrian manufacturing industry has increased by 3.6 percent year-on-year to 616,000. The unemployment rate fell significantly to 3.6 percent," said Pudschedl.

Input prices are rising faster than output prices
Higher raw material prices once again led to a significantly stronger increase in input prices than output prices, with the result that the earnings situation of domestic industrial enterprises tended to worsen somewhat compared to the previous month. "Due to the increased raw material prices, the input prices for Austria's industry have again increased more than the output prices, which tends to burden the industry," says Pudschedl. The lower demand dynamics are also reflected in another weak build-up of raw material stock, but at the same time, however, stocks of finished goods also rose slightly.

In the increasingly difficult environment, Austria is doing well for the time being
The sub-indicators suggest that the momentum will pick up little in the months to come and that the risks of further weakening will increase. There is a lack of pace in new business; especially from abroad, the growth in new orders since April has been significantly lower than in the previous months. The ratio of new orders to inventories has again deteriorated slightly compared to the previous month. However, the stocks of finished goods are still a bit too low to handle the rising order intake, so further production increases are expected.

Overall, however, the Austrian industrial companies are still optimistic. The Future Index, which reports production expectations over the next twelve months, did not decline from the previous month, rising from 61.4 to 61.9 points. The much stronger than expected decline in sentiment in Europe and also in Austria weakened in June, at least for the time being. "Although the UniCredit Bank Austria Purchasing Managers’ Index declined again in June, it shows signs of stabilisation. Austria's industrial economy continues to be a little more robust than in important neighbouring countries, especially Germany,” says Bruckbauer, adding, "the political burdens make the still-present optimism in the industry much more fragile than it was half a year ago.“

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Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Stefan Bruckbauer, Tel.: +43 (0)5 05 05-41951;
E-mail: stefan.bruckbauer@unicreditgroup.at