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Output falls at fastest rate since 2009 in Austria

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Christian Fernsby ▼ | March 31, 2020
Austria's manufacturing sector recorded its steepest drop in production since the global financial crisis in March, latest PMI data showed, as the fallout from the coronavirus pandemic led to a sharp reduction in demand and factory closures.
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Austria   Goods producers reacted to the disruption with the steepest drop in employment
Goods producers reacted to the disruption with the steepest drop in employment for more than a decade, with business confidence at a record low.

Topics: Austria

The headline UniCredit Bank Austria Manufacturing PMI registered 45.8 in March, down from 50.2 in February.

Though the lowest in five months, the latest reading somewhat masked the severity of the downturns in output, new orders and employment, with the suppliers' delivery times and stocks of purchases components both having a positive influence on the index.

Disruption to supply chains from global efforts to contain the spread of COVID-19 led to a nearrecord increase in lead times and precautionary stockpiling among some local manufacturers.

After rising in February for the first time in ten months, production across Austria's manufacturing sector fell sharply at the end of the first quarter.

The decline was the steepest since May 2009 and broad-based by main industrial grouping.

The rate of contraction of new orders in March was even quicker than that of production, with new export orders falling faster still.

For both total sales and new business from abroad, the decreases were the steepest for exactly 11 years.

In addition to scaling down employment capacity in March, through cuts to staff numbers (often contractors) and the implementation of short-time hours, manufacturers also sharply reduced their purchases of raw materials and other inputs.

However, despite the drop in buying activity, March saw pre-production inventories stabilise after ten months of decline.

This reflected safety-stock building by some firms, partly over fears of supply disruption.

Post-production inventories meanwhile rose – albeit marginally – for the first time in four months.

Widespread efforts to contain the spread of COVID-19 – including increased border checks and plant closures – led to a near-record increase in input lead times in March.

The extent of delivery delays was close to those seen at the height of the recent upturn that peaked in late-2017.

While there were some reports of supply shortages driving up costs, overall prices paid for inputs continued to fall during March, largely thanks to lower demand and the effects of the recent oil price slump.

The rate of decline accelerated for the fourth month in a row to the fastest since March 2016.

Output prices also fell at a quicker pace.

Worries about the impact of COVID-19 weighed heavily on business confidence in March.

After hitting a 20-month high in February, firms' output expectations posted a record fall, slumping to the lowest since data collection for this particular series began in July 2012.