Austria: Economic growth halves in Q2
Growth momentum in Austria lost some dynamism as the economy expanded 0.2% quarter-on-quarter in the second quarter, down from the first quarter’s 0.4% expansion. Nevertheless, annual growth accelerated to 1.7% in the second quarter, up from a revised 1.5% increase in the opening quarter of the year (previously reported: +1.4% year-on-year) and surpassing market expectations of 1.6% growth.
The moderation chiefly reflected easing momentum in fixed investment and the external sector. While fixed investment growth moderated (Q2: +0.5% quarter-on-quarter; Q1: +0.8% qoq), solid private consumption (Q2: +0.5%; Q1: +0.5%) and an uptick in public expenditure growth (Q2: +0.3%; Q1: +0.2%) buttressed domestic demand.
Although the external sector continued to support economic growth, its contribution moderated in Q2. Exports of goods and services expanded 0.5% quarter-on-quarter, down from the 0.9% increase in the first quarter; meanwhile, imports of goods and services also lost a step, increasing 0.4% over the prior quarter, following Q1’s 0.7% expansion.
In the second half of the year, the Austrian economy is expected to continue growing at a broadly similar pace compared to the first six months. However, over the year as a whole, economic growth seems set to moderate from last year’s seven-year high amid intensifying external headwinds linked to Brexit uncertainty, lingering global trade tensions and slowing European momentum.
That said, private consumption should continue to support the economy. This viewpoint is shared by Inga Fechner, Austria economist at ING, who stressed that “dynamics in the labour market remain good, with unemployment in Austria in an ongoing declining trend, while the number of employees keeps rising.”
Meanwhile, the expected pick-up in government expenditure will depend on the outcome of September’s snap election in the wake of the so-called “Ibiza scandal”. Planned fiscal stimulus is likely to be postponed, or could even be discarded in the event Sebastian Kurz does not form the next government.