PMI Signals Deterioration in Business Conditions

Steven Bobson, Europe & Americas Editor
July 30, 2012 /

Operating conditions in the Austrian manufacturing sector deteriorated during July as new orders decreased, leading to falls in output, purchasing and employment.

Input costs decreased for the second month running, and at a substantial pace, while firms trimmed their output prices again. The seasonally adjusted Bank Austria Manufacturing PMI – a composite indicator designed to provide a single-figure snapshot of manufacturing performance – fell to 47.4 in July, down from 50.1 in the previous month.

The reading signalled the first deterioration in the health of the sector in 2012 so far, and the strongest since July 2009.

New orders decreased for the third time in the past four months in July, with the solid reduction the sharpest in 2012 so far. Respondents mainly linked the drop in new orders to lower demand.

New export orders also decreased, extending the current sequence of contraction to four months. The effects of the fall in new orders were felt throughout the sector in July.

Production declined for the first time since December, but a build up of
stocks of finished goods was still recorded.

Backlogs of work fell for the eleventh time in the past 12 months amid a lack of new business.

Although the pace of depletion slowed over the month, it was still solid. Manufacturers reduced their staffing levels for the second consecutive month. Moreover, the rate of job cuts quickened in July and was the strongest in two-and-a-half years.

A further reduction in input prices was recorded during July.

Furthermore, the rate of decline was considerable, and quickened from that seen in June to the fastest since May 2009. According to respondents, lower input costs mainly reflected reduced raw material prices, with oil, polymers and steel all reported as costing less.

Falling input costs and strong competitive pressures contributed to a second successive reduction in output prices in the sector. That said,
the rate of decline was only slight as the majority of respondents posted no change in charges.

Manufacturing firms lowered their purchasing activity at a marked pace in July, in line with declining new orders. The fall in demand for inputs enabled suppliers to reduce lead times for the third month running.

Furthermore, the latest improvement in vendor performance was the
strongest since June 2009. Declining new orders led firms to streamline their stocks of purchases, and at a solid pace.

Preproduction inventories have decreased in five of the past six months.

 

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