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Export-led slowdown of Austrian manufacturing sector

Staff Writer | February 27, 2019
Falling export orders continued to weigh on Austria's manufacturing sector in February, with the latest PMI data from UniCredit Bank Austria indicating the weakest improvement in business conditions for over three years.
Europe   February saw the PMI slip to a 37-month low
The headline UniCredit Bank Austria Manufacturing PMI is a composite single-figure indicator of manufacturing performance.

It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.

Any figure above 50.0 indicates overall improvement of the sector.

February saw the PMI slip to a 37-month low of 51.8 from 52.7 in January.

The month-on-month fall in the index was driven mainly by the supplier delivery times component, which showed the least marked deterioration in vendor performance since April 2016.

Slower employment growth also imparted a negative directional influence on the index.

The slowdown in February was led by a deepening downturn in new export orders, which fell the most since October 2012.

This caused a drop in overall order books for the second straight month, although the decline was only marginal and slower than in January, indicating some resilience in the domestic market.

Despite the sustained decline in demand, output levels continued to rise during February.

The rate of expansion slowed but was solid overall.

Growth in production was broad-based by product type and led by a steep rise in consumer goods output.

Backlogs of work fell during February as a consequence of the dichotomy between output and new orders.

A rise in stocks of finished goods – the fourth in as many months – was also recorded, boding ill for future output unless demand revives.

Despite the soft patch in demand, manufacturers – and in particular makers of capital goods – remained in hiring mode.

That said, the rate of job creation eased for the third month in a row to its weakest since May 2016.

Growth in manufacturers' purchasing activity meanwhile slowed to near-stagnation in February, showing the weakest rise in buying levels for over three years.

The disinflationary effects of the slowdown were seen in manufacturers' purchasing costs, which rose at the weakest rate in 28 months.

While there mentions of higher energy prices and the influence of wage pressures, lower prices for steel and paper products weighed on overall cost increases.

Factory gate charges also rose at a slower pace in February, with the rate of inflation easing for the third month in a row to the lowest since December 2016.

Austria's manufacturers remained cautiously optimistic towards the outlook, citing positive expectations for new products and entry into new markets, but also concerns towards an economic slowdown.