Austria: GDP rebounds in Q3 at fastest rate on record according to flash estimate; strong performance unlikely to last
According to a flash estimate from the Austrian Institute of Economic Research, GDP expanded 11.1% on a seasonally-adjusted quarter-on-quarter basis in the third quarter, switching from the second quarter’s 12.1% contraction. Q3’s reading marked the strongest growth on record, after the economy shrank at the sharpest pace since World War II in Q2. However, the economy has yet to make up all the ground lost in the second quarter.
The uptick reflected booming demand: Household spending rose 11.8% in the third quarter as Covid-19 restrictions were lifted (Q2: -12.3% s.a. qoq), while fixed investment grew 4.5% in Q3, contrasting Q2’s 7.5% decrease.
Exports of goods and services increased 10.4% in Q3 (Q2: -13.2% s.a. qoq) as lockdowns were lifted abroad, while imports of goods and services grew 6.2% in the quarter (Q2: -13.2% s.a. qoq) due to recovering domestic demand.
On an annual basis, economic activity decreased at a softer rate of 5.3% in Q3 compared to the previous quarter’s 14.5% collapse.
On to the next quarter, activity will likely be muted as Covid-19 cases are surging both at home and elsewhere in Europe, threatening to hamper the recovery. In Austria, new restrictions were announced on 31 October, which will hit the services sector particularly hard.
As Franziska Biehl, economist at ING, put it:
“Given the high importance of the tourism sector for the total economy, another round of lockdowns in Austria and the rest of the eurozone will hit the Austrian economy harder than most of its peers. Tourism contributes 5.1% to total Austrian GDP, compared to 1.2% that tourism contributes to GDP in the EU as a whole. […] In recent days, the risk of a double-dip recession in the entire eurozone has clearly increased. Austria is no exemption.”