Austria: Economy slows in third quarter but continues to recover
December 10, 2010
In the third quarter, GDP increased 0.9% over the previous quarter in seasonally adjusted terms, confirming the November flash estimate released by the Austrian Institute of Economic Research (WIFO). Moreover, the quarterly expansion came in below the 1.2% increase observed in the second quarter. On an annual basis, the economy expanded 2.4% in the third quarter. The deceleration over the previous quarter was mainly the result of a weaker performance in the external sector, despite resilient growth in Germany, Austria's main trading partner. Exports of goods and services rose 3.6% in the third quarter (previously reported: +3.4% quarter-on-quarter), down from the 5.3% expansion in Q2. Simultaneously, imports increased 3.2% over the second quarter (previously reported: +2.6% qoq), below the 3.7% increase witnessed in the second quarter. As a result, the net contribution from the external sector to overall economic growth deteriorated from a 1.2 percentage-point contribution in the second quarter to a 0.5 percentage-point contribution in the third. On the domestic side of the economy, private consumption continued to grow at the 0.2% pace recorded in the second quarter, while government consumption swung from a 0.1% contraction in the second quarter to a 0.1% expansion in the third. Gross fixed investment was revised in this second estimate and accelerated at the fastest pace since the second quarter of 2008, posting a 0.9% expansion in Q3 (previously reported: +0.6% qoq), contrasting a 0.2% contraction in Q2. At the sector level, the third quarter result included a contraction in agriculture (Q2: -0.7% qoq; Q3:-0.9% qoq) and a slowdown in industrial production (Q2: +4.1% qoq; Q3:+2.3% qoq). The Austrian Institute of Economic Research (WIFO) expects GDP to expand 2.0% this year and to accelerate to 2.2% in 2011. Meanwhile, in its December economic outlook report, the Central Bank revised its growth estimates and now sees economic activity rising 1.9% this year (previously: +1.6%) and 2.1% next year (previously: +1.8%). For 2012, monetary authorities see the economy expanding 2.3%.
Author: Ricardo Aceves, Senior Economist