Business conditions in Austria’s manufacturing sector improved at the start of 2016 with output, new orders and employment all rising during the month.
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Purchasing activity stabilised but companies nevertheless remained cautious about their stock policies, with inventories falling further. Meanwhile, input costs declined at a stronger rate, while the rate of price discounting was little-changed from that recorded in December.
The seasonally adjusted Bank Austria Manufacturing PMI – a composite indicator designed to provide a single-figure snapshot of manufacturing performance – rose from December’s four-month low of 50.6 to 51.2 in January, thereby signalling an acceleration in manufacturing growth.
Although slight overall, the rate of expansion signalled was above the 2015 average.
A sharp increase in output was the main driver of the higher headline PMI, with production rising at the strongest rate in three months.
Investment goods producers reported a particularly marked expansion in output, according to sector evidence. Meanwhile, new order intakes returned to growth, following a brief dip into decline in December.
The rate of new business growth was only marginal, however. Some companies attributed higher new orders to price discounting. That said, the increase was mainly driven by stronger demand from the domestic market, as new export orders continued to decline.
Some panellists commented on lower demand from European markets (with the exception of Germany).
January saw backlogs of work fall for a second month running, thereby signalling a lack of pressure on operating capacity. Consequently, companies grew more cautious about their hiring policies.
Although staffing levels increased for the fifth month running, the rate of job creation slowed and was only marginal overall.
Purchasing activity meanwhile stabilised in January, following a three-month period of decline.
Companies nevertheless continued to optimise stock levels, as highlighted by further reductions in both pre- and post-production inventories. That said, the respective rates of decline were littlechanged since the previous month.
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