UniCredit Bank Austria Purchasing Managers’ Index in December:
Drop in export orders slows economic growth of Austrian industry
- UniCredit Bank Austria Purchasing Managers’ Index drops to 53.9 points in December
- The index, however, still continues to exceed its long-term average value and has been clearly above the Purchasing Managers’ Index for the eurozone (51.4 points) for three consecutive years
- Solid production expansion by Austrian companies despite increased losses of new export business
- Industry created 18,500 new jobs in 2018; unemployment rate in the sector fell to 3.8 percent
- Fall of oil prices slows increase in purchasing prices
- Medium-term business prospects drop again: 2019 industry growth will be noticeably lower than in 2018
The industry boom slowdown, which already started at the beginning of 2018, also continues at the end of the year. “The UniCredit Bank Austria Purchasing Managers’ Index dropped to 53.9 points in December. The decrease by more than 10 points in one year is the most significant since the start of the financial crisis in 2008; despite this, the Austrian economy still continues to grow. The current indicator score even
exceeds the average since the start of the survey in 1998”, said Stefan Bruckbauer, UniCredit Bank Austria chief economist. The Austrian industry continues to stand out positively from the international competition despite the fact that the economic peak at the turn of the year 2017/2018 has been passed significantly by now and economic growth markedly slowed down in 2018. The national Purchasing Managers‘ Index is at the level of its US equivalent and for the last three years has exceeded the preliminary Purchasing Managers’ Index for the processing industry in the eurozone, which dropped to 51.4 points. The Purchasing Managers‘ Index of the German industry of 51.5 points is also clearly below the Austrian comparative value.
“The Austrian industry is starting to experience the negative external impacts more strongly by now. Fewer export orders cause a near stagnation of new orders overall. Companies still increased production and staffing levels to process back orders, however, both at a lower rate. More restraint in purchasing and more cautious inventory management indicate a calmer phase of growth of Austrian industry”, said Bruckbauer
New export business also weaker for third consecutive month
The decline of the current Purchasing Managers’ Index is particularly due to the development of new orders. The partial index of new business dropped to 50.6 points in December – the lowest figure since the start of 2016. “Austrian companies can no longer record a significant increase in orders for the first time in three years. The predominant cause is a drop in demand from abroad. Export orders have slowed at an increasing rate for the third consecutive month and national new business is hardly able to compensate for these losses”, said Walter Pudschedl, UniCredit Bank Austria economist. Austrian companies particularly face lower demand from the automotive sector and lacking new orders from the emerging economies.
Back orders will be processed
Despite the fact that new business is almost stagnant, the Austrian industry expanded production again in December. However, the rate of the output increase has declined and by now is significantly lower than at the start of the year. “The production index indicates a continued strong business expansion in December despite the decrease to 53.9 points, predominantly due to the slight decline in the consumer goods sector. With continued stagnant order development, this is due to the still increasing back orders, which indicate persistent capacity bottlenecks, predominantly in the investment goods sector of the Austrian industry”, said Pudschedl.
Unemployment rate in industry fell to only 3.8 percent in 2018
In view of the continuing production expansion, Austrian companies had a renewed additional demand for staff in December. However, the rate of employment also slowed in tandem with the development of the production output. The employment index dropped to 55.7 points – the lowest figure in almost two years. Austrian industry therefore continues to be the job generator of the Austrian economy also at the end of 2018. In 2018, employment in material goods manufacture at just over 3 percent increased strongly above average. The overall economic plus amounted to 2.4 percent. “18,500 new jobs were created by the industry in 2018. The unemployment rate in the sector dropped from 4.4 percent in the previous year to 3.8 percent in 2018. Unemployment decreased in all federal states and particularly significantly in the Burgenland and Carinthian industry”, said Pudschedl. The unemployment rate in Austrian manufacturing in 2018 therefore was not even half as high as the figure of 7.7 percent for the total economy. Tyrol and Upper Austria continue to have the lowest unemployment rate in the industry at approx. 2.5 percent. Vienna brings up the rear in Austria with just over 8 percent.
Price increase slowed down again, however, continues at an above average rate
Fewer price increases in purchasing facilitated a slight relief in terms of costs for Austrian companies. As a result of cheaper oil and raw materials such as steel, the input prices increased at the lowest rate in almost two years. High energy prices and increased expenditure for staff mean an above-average pressure on costs for the Austrian industry. Output prices therefore also had to be raised. The intermediate and consumer goods sectors in particular reacted to the development of costs by increasing output prices.
Further cooldown of economic growth expected
The renewed decline of the UniCredit Bank Austria Purchasing Managers’ Index in December makes it clear that the ongoing slowdown of the industrial boom since the start of the year is continuing. Production and staffing capacities due to accrued back orders are still increasing at the moment, however, the drop in export business has continued for three months and also resulted in a near stagnation of all new orders for the first time in three years. A slowdown of the currently still above-average industrial boom is expected over the course of 2019.
In line with this, the index ratio between new orders and stocks of finished goods, a reliable indicator of the immediately to be expected industrial dynamic, has shifted for the first time since the start of 2015. According to that, the sales depots are currently sufficient to be able to satisfy new business over the coming months without a further expansion of production.
The business prospects within a year also remained low in December. The forecast improved slightly to 52.2 points compared to the previous month, however, the level of optimism is the second-lowest in almost four years.
Bruckbauer expects that “the rate of growth of the Austrian industry will slow down further over the coming months. A number of political uncertainties, the increased protectionism in global trade and stricter financing terms in particular for emerging economies lower the prospects for 2019. Austrian industry will still expand strongly in the coming year with a production plus of ca. 3 percent. However, the growth rates of the two previous years will no longer be attainable.”
UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Ph.: +43 (0) 5 05 05-41957;