Austria: Economy accelerates in 2018 despite softer Q4
March 1, 2019
The economy grew at a slightly quicker pace in the fourth quarter than previously estimated, as highlighted by a second reading of national accounts data. In the final quarter of last year, the Austrian economy expanded 0.3% quarter-on-quarter; although this was slightly down from the third quarter’s 0.4% growth rate, it was slightly up from the previously estimated 0.2% increase. Compared to the same quarter a year prior, the economy grew 2.4%, thus marking a slight uptick from the previously estimated 2.3% growth rate and the third quarter’s 2.2% expansion. Despite the upward revision, the growth rate for the full year remained at 2.7%, which is nonetheless up from 2017’s 2.6% expansion.
Austria’s robust growth was buttressed by both domestic demand and the external sector. Domestically, private and public consumption were slightly stronger than initially estimated. Household expenditure grew 0.4% in the fourth quarter over the prior period (previously reported: +0.3% quarter-on-quarter), up slightly from the 0.3% expansion seen in the third quarter. Household spending was aided by still-low unemployment and slightly softer inflationary pressures. Public consumption, meanwhile, rose 0.1% in the fourth quarter over the prior period. This matched the preliminary result and marked an acceleration from the flat reading in the previous quarter. Fixed investment growth continued to lose steam in the fourth quarter and grew at a slightly softer pace than initially estimated (Q4: +0.4% qoq; previously reported: +0.5% qoq; Q3: +0.7% qoq). Troubles in the automotive sector weighed on the reading, although a robust construction sector and expenditure on machinery and electrical equipment buttressed fixed investment growth.
Meanwhile, the external sector continued to contribute to economic growth. Goods and services exports increased 0.7% in the final quarter (Q3: +0.8% qoq), which was up noticeably from the first reading’s 0.4% expansion. The revised figure was mainly due to stronger services exports. Imports of goods and services, meanwhile, grew 0.6%, up markedly from the previously estimated 0.3% expansion and matching the third quarter’s reading.
Looking forward, the economy should continue growing at a robust pace this year, although will likely moderate in line with easing global and European economic momentum. Resilient private consumption and stronger public expenditure are seen buttressing domestic demand, while the external sector will be tested by accumulating headwinds. A possible hard or disorderly Brexit, a prolonged Italian recession and lingering trade tensions weigh on Europe’s outlook and thereby Austria’s exports, which are geared towards Europe.
Author: Jan Lammersen, Economist