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Austria PMI March 2022

Austria: Manufacturing PMI rises in March despite the war in Ukraine

Operating conditions in Austria’s manufacturing sector improved at a stronger clip in March, with the UniCredit Bank Austria Manufacturing Purchasing Managers’ Index (PMI) rising to 59.3 in March from 58.4 in February. Consequently, the index moved further north of the neutral 50-threshold that separates an improvement from a deterioration in business conditions compared to the prior month.

The improvement came on the back of lengthening delivery times due to further constraints on supply chains and rising output levels. Production was, however, capped by material shortages as the Russian invasion of Ukraine put further strains on already existing supply issues. Furthermore, Covid-19-related staff absences also weighed on productive capacity. The war in Ukraine also weighed on demand as inflows of new orders rose at a slower pace, although export orders held up somewhat better. Turning to prices, rising commodity prices, particularly for energy, resulted in a surge in input cost inflation. As such, output price inflation also gained pace. Lastly, business expectations took a blow from the fallout of the war in Ukraine, falling to their lowest levels since June 2020.

Regarding the economic impact of the war in Ukraine on the Austrian economy, analysts at Erste Bank commented:

“The war in Ukraine and resulting unprecedented political and economic sanctions against Russia will drive up prices and dampen the economic recovery in Austria. […] The high raw material and energy prices, as well as problems in supply chains, will also have a negative impact on industrial production and thus slow down investment development.”

Diving deeper, analysts at the EIU added:

“The manufacturing sector is export-oriented and highly integrated into cross-border supply chains, in particular with Germany. Its growth prospects thus depend crucially on economic and sectoral developments in Germany. This is particularly the case for the important machinery and equipment, and automotive, sectors, which account for about a third of all goods imports and exports. […] German car producers, for example, rely on key components such as wire harnesses manufactured in Ukraine. With the war disrupting supply chains, Volkswagen halted production lines and announced on 8 March that it would stop taking orders for plug-in hybrid cars.”

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