March data indicated that operating conditions in the Austrian manufacturing sector improved at a steeper rate than in the previous month. Output and new business increased at the strongest rates since April 2006 and November 2006 respectively. The pace of job cuts slowed for the ninth month running, while stocks of purchases were broadly unchanged following an 18-month sequence of decline.
The seasonally adjusted Bank Austria Manufacturing Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of manufacturing performance – posted above the 50.0 no change mark for the fourth month in a row during March. Moreover, the index rose to 56.7, from 55.4 in February, to signal the fastest improvement in business conditions since February 2007.
Manufacturing production increased for the ninth consecutive month in March. Furthermore, the rate of expansion accelerated to the sharpest in nearly four years. Rising output reflected higher new business.
New orders increased as demand strengthened and firms introduced new products. The rate of growth of total new business accelerated to the fastest since November 2006. New export orders rose at a similar pace to overall new business, growing for the ninth month running.
The latest increase in new business led to a third successive monthly accumulation of backlogs of work in March. Some panelists reported hiring new staff over the month. Although employment still fell slightly, the rate of job cuts eased to the weakest in the current 23-month period of reduction.
Input cost inflation surged in March, and remained steeper than the long-run series average. The increase in input prices – the fastest since August 2008 – largely reflected higher raw material costs, with respondents noting shortages at suppliers. Lead times lengthened to the greatest extent since September 2007, due to both growth in demand for inputs and insufficient stocks among vendors.
Higher input costs were the principal cause of the first rise in output prices in seventeen months in March. However, intense competition meant that the rate of inflation was only marginal.
Purchasing activity increased substantially in response to rising demand. Moreover, the rate of growth was the fourth-fastest in the series history. Despite this, pre-production inventories were broadly unchanged in March. This followed 18 successive months in which stocks had decreased. Meanwhile, stocks of finished goods continued to fall, extending the current period of reduction to 15 months. However, the rate of decline was the slowest in this sequence.