Austria: Growth stays steady in the third quarter despite downward revision
October 31, 2018
According to a second reading of national accounts data, the Austrian economy grew a tad slower than previously estimated. In the third quarter, economic growth was revised slightly down from 0.4% quarter-on-quarter, as reported in the flash reading, to 0.3% qoq (Q2: +0.3% quarter-on-quarter). The headline figure now matches the preliminary result for the EU28 and was driven by both the domestic economy and the external sector. Compared to the same period a year ago, the slowdown was more marked than estimated in the preliminary reading: Year-on-year growth was revised down from 2.4% to 2.2% (Q2: +2.7% year-on-year).
Compared to the previous quarter, the domestic economy benefited from strong household consumption and fixed investment growth. Private consumption expanded 0.3%, slightly down from the preliminary estimate of 0.4% and the second quarter’s 0.4% expansion. Household expenditure benefited from still-elevated consumer confidence amid a low unemployment rate and subdued inflation. The slight downward revision was due to a marked contraction in consumer durables linked to troubles in the automotive sector due to new, tougher emission regulations. New car registrations were down by nearly a fifth in the quarter. Meanwhile, fixed investment decelerated more than previously estimated owing to a revision to the second quarter’s expansion (Q3: +0.7% qoq; Q2: +1.1% qoq, previously reported: +1.2% qoq). Investment expenditure in the third quarter remained robust on strong expansions in the construction sector, while equipment investment increased only moderately. Meanwhile, public consumption growth was revised down a tad from 0.5% to 0.4% (Q2: +0.5% qoq).
The external sector also contributed positively to economic growth due to robust export growth (Q3: +0.7% qoq, previously reported: +0.6% qoq; Q2: +0.7% qoq) and a slight moderation in imports (Q3: +0.4% qoq, previously reported: +0.3% qoq; Q2: +0.7%). Due to Austria’s regional orientation, the external sector has seemingly remained largely unmoved by global trade tensions. However, the political uncertainty and possible intensifications of trade tensions between the U.S. and China and the EU continue to pose downside risks.
Austria’s economy is expected to finish the fourth quarter on a robust footing, although the pace of growth is expected to moderate from the stellar quarters earlier this year. Next year, the economy should continue to grow at a healthy pace due to a healthy labor market and robust growth in fixed investment, although growth is seen moderating noticeably from strong performances last year and this year.
Author: Jan Lammersen, Economist