UniCredit Bank Austria Purchasing Manager Index in March:
Austria's industry takes small steps out of the trough
- The UniCredit Bank Austria Purchasing Managers' Index rose for the third month in a row in March to 46.9 points
- The decline in new business accelerated again and led to a slightly sharper fall in output in March
- Job losses slowed for the fourth month in a row
- The renewed rise in costs led to an increase in output prices for the first time in exactly two years
- Cost-conscious reduction of inventories in a weak demand environment
- Despite positive international data: Index of output expectations for the year fell to 51.0 points and is thus only just in positive territory
The positive trend in Austrian industry slowed significantly in March. “The UniCredit Bank Austria Purchasing Managers' Index rose only minimally by 0.2 points to 46.9 points in March, characterised by a very uneven development of the individual components. However, with the third increase in a row, the indicator reached its highest value for exactly two years,” says UniCredit Bank Austria Chief Economist Stefan Bruckbauer and adds: “However, the growth threshold of 50 points was once again clearly undercut. The current indicator thus signals a continuation of the recession in domestic industry, which at least gradually eased over the course of the first quarter of 2025.”
However, the light at the end of the tunnel hardly got any brighter in March. “The pace of the decline in production increased slightly at the beginning of spring, especially as new business fell more sharply than in the previous month. Entrepreneurs reacted by cutting back on purchasing volumes in order to reduce storage costs. Due to the renewed rise in costs, businesses also increased their output prices for the first time in two years, but not enough to improve the earnings situation due to weak demand. The main positive aspect in March was the slowdown in job losses,” says Bruckbauer, summarising the most important results of the monthly survey of Austrian purchasing managers.
Austria's industry was unable to follow the strong upward trend in Europe
With the weakening of the improvement trend, the development in Austria differed from the trend in most other European countries. “In the euroarea, the Purchasing Managers' Index for the manufacturing industry rose noticeably to 48.7 points, driven among other things by an improvement in Germany and France to 48.3 and 48.9 points respectively. The Austrian index thus outperformed by the value in the euroarea, as it has been for the past two and a half years. The gap doubled compared to the previous month and the German value was also higher for the first time in six months,” says UniCredit Bank Austria economist Walter Pudschedl.
Further drop in orders and slight decline in production
The improvement in the output index did not continue in March. The output index fell slightly by 0.2 points to 48.2 points. “While the output index in the euroarea and Germany exceeded the 50-point mark in March, signalling production growth in the manufacturing industry for the first time in around two years, the decline in production in the domestic industry accelerated slightly. This is in line with the accelerated decline in new orders in Austria. In contrast, German industrial companies recorded more new orders for the first time in three years,” says Pudschedl, adding: “The improvement trend in new business in recent months in the euroarea and Germany is likely to have been fuelled by US customers bringing forward purchases in anticipation of possible tariff increases. While domestic demand weakened considerably, the export order index in Austria also rose in March, but remained well below the growth line at 45.5 points.”
The infrastructure programme announced by the German government appears to have already triggered a turnaround in sentiment in industry, but this did not reach Austrian industry. The price competitiveness of “Made in Austria”, which has also fallen in a European comparison due to the high unit labour cost dynamics and higher energy costs, placed an additional burden on Austria.
Job cuts slowed down again
The number of employees in domestic industry continued to fall at the end of the first quarter of 2025. This means that the number of employees in manufacturing has been falling for almost two years. In March, however, the pace of job cuts slowed for the fourth month in a row. The employment index thus reached a ten-month high of 43.2 points.
“The unemployment rate in the manufacturing industry in Austria averaged 4.3 per cent in the first quarter of 2025, compared to an annual average of 4.0 per cent in 2024. Low capacity utilisation and efforts to cut costs will lead to a further decline in employment in the sector in the coming months, despite the gradual improvement in the industrial economy. We expect the unemployment rate in the domestic industry to rise to an average of 4.5 per cent in 2025,” says Pudschedl.
Cautious warehouse management dominates
The lower production requirements led to a reduction in purchasing volumes across the board in March. In combination with full warehouses at many suppliers, the average delivery time accelerated slightly. Due to declining order backlogs and increased efforts to reduce costs, stocks of purchases, which were relatively high in view of the weak demand, were further reduced, albeit at the second-lowest rate in the past two years. The index for stocks of purchases rose to 46.4 points, but was still below the index for stocks of finished goods of 47.8 points, which fell compared to the previous month. The decline was mainly due to lower production and a lack of customer demand.
Higher prices after cost increases
Domestic industrial companies were confronted with higher costs for the second month in a row in March due to higher metal prices and increased food prices, among other things. The corresponding index rose to 53.0 points, the highest value since August last year.
“The recent rise in costs was reflected in higher output prices for the first time in exactly two years. The higher costs were passed on to customers both in the intermediate goods and capital goods sectors as well as among consumer goods manufacturers. However, as the companies' pricing power was low due to the sluggish demand, the increase in prices remained below that of costs,” says Pudschedl, adding: “On average, the earnings situation again tended to be less favourable than in the previous month. Domestic industrial companies have now been confronted with a deteriorating earnings situation for a year and a half”.
Uncertain expectations
The UniCredit Bank Austria Purchasing Managers' Index rose for the third month in a row in March, but recently showed only a very weak and inconsistent upward trend. In view of the current value of 46.9 points, a continuing recession in Austrian industry can still be assumed.
The end of the recession in the domestic industry is not yet in sight, but there are signs that the industrial economy is stabilising. Although the order-to-stock ratio deteriorated slightly in March, this only just indicates that at the current level of stocks of finished goods, new orders can also be fulfilled with lower production capacities. Production is therefore unlikely to fall any further in the coming months.
A noticeable recovery does not appear to be in sight, as indicated by companies' medium-term production expectations. “Concerns about reduced competitiveness, generally weak demand and the negative consequences of US customs policy depressed companies' expectations again somewhat in March. The index for production expectations over the next twelve months fell to 51.0 points, but remained in positive territory for the third month in a row,” says Bruckbauer, adding: “The announcement of the investment programme in Germany in recent weeks brought about a surprising change in the general conditions. This is fuelling hopes of an imminent improvement in Austria too.”
Enquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Phone: +43 (0)5 05 05-41957;
E-mail: walter.pudschedl@unicreditgroup.at