The Austrian industrial economy weakened more in February than at the beginning of the year. After a gradual recovery over the past three months, the Bank Austria Purchasing Managers’ Index fell to 47.1 points in February and is thus still below the growth threshold of 50 points. The reason for the decline is the ongoing weakness in demand and the decline in new business, which has led to a drop in production at domestic companies.
In February, the companies reduced their production for the ninth time in a row, and significantly more than in the previous month of January. This means that the slight improvement that has been observed since the autumn has not continued. While the declines in domestic business moderated somewhat, the decline in export demand accelerated. “The overall drop in orders in Austrian industry decreased for the fourth month in a row and was as low as it was last in July 2022,” said Bank Austria economist Walter Pudschedl.
On the other hand, the falling demand had a positive effect on the supply chains. Delivery times were significantly reduced in February and the price pressure in purchasing also eased. The relaxation of the supply chains is also reflected in the index, which shows the shortest delivery times in the industry since the end of 2019. Thanks to the significant easing of delivery pressure, purchase prices in domestic industry rose more slowly than they had in over two years. While the prices for many raw materials, such as energy, actually fell, rising wages, among other things, increased companies’ costs.
Seasonally adjusted, the number of people employed in manufacturing reached a new high in February at 645,000. Although the drop in the employment index to 52.3 points indicates continued growth, the pace of job creation has slowed. The number of reported vacancies in the sector is still high at 13,000, but is declining significantly. “At 3 percent, the seasonally adjusted unemployment rate in February in industry was still not even half as high as in the economy as a whole,” says Puschedl.
In February, domestic companies again assessed the medium-term prospects less favorably than in the previous month. The index of production expectations for the year as a whole fell from 51.1 points to 49 points, pointing to a further downward trend in domestic industry unless there is a noticeable revival in demand.