29.01.2025

UniCredit Bank Austria Purchasing Manager Index in January:
Slightly more confidence, recession in industry weakened

  • The UniCredit Bank Austria Purchasing Managers' Index rose to 45.7 points in January, the highest value for six months 
  • The slowdown in the decline in new orders slowed the pace of output cuts 
  • The continued high level of staff reductions improved productivity in the industry at the start of the year 
  • Decline in costs was again lower than that in output prices: Average earnings situation deteriorated again
  • Weak demand and low production requirements led to a further reduction in stocks of purchases and of finished goods 
  • Future output expectations for the year turned positive in January and reached their highest level in six months 
     

At the start of 2025, there was some light at the end of the tunnel for Austrian industry. “The start of the new year gives rise to new hope for an improvement in the industrial economy in Austria. After a weak end to 2024, the UniCredit Bank Austria Purchasing Managers' Index rose to 45.7 points in January. The indicator thus climbed by 2.5 points compared to the previous month to its highest value since May last year. Domestic industry is still in a recession, but this has eased somewhat,” says UniCredit Bank Austria Chief Economist Stefan Bruckbauer, adding: “The decline in production slowed significantly in January after the order situation also improved. However, sharply falling output prices were offset by only slowly declining costs, which tended to contribute to a deterioration in the earnings situation. In view of the high level of uncertainty, job cuts continued at a rapid pace, which contributed to an improvement in productivity.”

The consistent improvement trend at international level at the start of the year was also encouraging for Austrian industry. “In the US, the Purchasing Managers' Index for manufacturing rose slightly back into growth territory for the first time in six months and in the eurozone the indicator improved to 46.1 points, supported by an increase in the core markets. Even in Germany, the most important sales market for domestic industry, there were signs of a weakening of the recession with a smaller decline in production and an easing of the drop in new orders,” said Bruckbauer. 

Production and new order losses decreased
Both new business and production saw an increase in the index in January. “The decline in production slowed noticeably at the start of the year. At 46.6 points, the production index climbed to its highest level in eight months,” says UniCredit Bank Austria economist Walter Pudschedl, adding: “The output cuts were slowed down by the smaller losses in new business. The new order indices each rose by four points, but remained well below the growth threshold of 50 points. Both domestic orders and export demand continued to be characterised by a reluctance to invest in an uncertain environment and reduced competitiveness in the face of high unit labour cost dynamics.”

Adjustment of personnel capacities continues at a rapid pace
In view of the high level of economic uncertainty, domestic companies once again reduced their headcount at a rapid pace in January. Although the employment index rose to 41.3 points, it once again remained well below the production index, which is likely to indicate an improvement in productivity. However, since staffing levels were adjusted only hesitantly until the beginning of 2024 despite declining production in view of positive growth expectations in order to keep qualified workers in the company, there is still potential for improvement in terms of productivity. Since 2022, real gross value added per hour of employment in Austria's manufacturing industry has fallen by around 5 per cent. 

The seasonally adjusted unemployment rate in the manufacturing industry in Austria was 4.1 per cent at the start of 2025. “In view of the ongoing recession, the upward trend in the unemployment rate in the domestic industry is expected to continue in the coming months. After an average of 3.8 per cent in 2024, the unemployment rate is likely to rise to up to 4.5 per cent in 2025. That would be the highest figure since the coronavirus year 2020,” says Pudschedl, adding: "This means that despite higher momentum, the unemployment rate in the sector will remain significantly lower than in the economy as a whole at 7.2 per cent in 2025.

Only slight decline in input prices, stronger decline in output prices
In the weak economic environment, domestic companies continued to face falling prices at the start of the year. In purchasing, however, the fourth consecutive decline in prices was only very slight. The corresponding index rose to 49.2 points.

“Higher wages and the increased CO2 tax significantly curbed the fall in input prices. The only slight decrease in costs in January was once again offset by a stronger demand-driven reduction in output prices. As  result, the average earnings situation again tended to deteriorate compared to the previous month. Domestic industrial companies have been confronted with a deteriorating earnings situation for one and a half years,” says Pudschedl. 

Cost-conscious warehouse management 
The slower decline in output and new business also reduced the pace at which manufacturers reduced their purchasing volumes in January. “Cost-conscious inventory management is a top priority in the current economic situation. Domestic companies have once again reduced their stocks of finished goods and purchases. In view of the lower production restrictions, the reduction in stocks of purchases accelerated, while stocks of finished goods fell much more slowly than in the previous month. Both are signs of the high level of uncertainty in domestic industrial companies,” says Pudschedl. 

Pessimism has decreased at the beginning of the year 
The latest UniCredit Bank Austria Purchasing Manager Index cautiously points to a slowdown in the recession in Austrian industry at the start of 2025. The decline in production and the losses in new business have decreased, strengthening hopes that Austria's industry will be able to return to growth over the course of the year. However, the ratio between new orders and stocks of finished goods directly shows that, despite an improvement, there is still no need to expand production in order to fulfil current orders. 

“Pessimism in the domestic industry has decreased. Austrian companies' production expectations turned positive in January and promise at least moderate growth for the year as a whole. At 52.6 points, the future output index rose to its highest level in half a year ,” says Bruckbauer, adding: “The first cautious signs of an economic recovery on a global level, supported by the easing of monetary policy and the normalisation of inflation, give hope for an end to the recession in domestic industry. However, expectations remain cautious in view of the protectionist measures taken by the new US government. In addition, the deteriorating price competitiveness of the domestic export industry is dampening the outlook.”
 

Enquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0)5 05 05-41957;
E-mail: walter.pudschedl@unicreditgroup.at