Austria: Economy slows in third quarter but recovery remains strong
November 12, 2010
In the third quarter, gross domestic product (GDP) increased 0.9% over the previous quarter in seasonally adjusted terms, according to a preliminary flash estimate released by the Austrian Institute of Economic Research (WIFO) on 12 November. The quarterly expansion was below the 1.2% increase observed in the second quarter but overshot last month's Consensus Forecast, which saw the economy growing 0.6%. The deceleration over the previous quarter was mainly driven by a weaker performance of the external sector, despite resilient growth in Austria's main trading partner, Germany. Exports of goods and services grew 3.4% in the third quarter, below the 5.2% expansion observed in the second quarter. Simultaneously, imports increased 2.6% over the second quarter (Q2: +3.3% quarter-on-quarter). As a result, the net contribution from the external sector to overall economic growth deteriorated from a 1.4 percentage-point contribution in the second quarter to 0.7 percentage points 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 quarter. Gross fixed investment accelerated at the fastest pace since the second quarter of 2008 and posted a 0.6% expansion in Q3, contrasting a contraction of the same magnitude in Q2. At the sector level, the third quarter result reflected a deeper 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). On an annual basis, the economy expanded 2.4% in the third quarter, which mirrored the reading observed in the second quarter. The economy maintained the quickest rate observed since the third quarter 2008. The Austrian Institute of Economic Research (WIFO) expects GDP to expand 2.0% in 2010 and 1.9% in 2011. Meanwhile, in its bi-annual economic outlook report, the Central Bank expects economic activity to rise 1.6% this year. For 2011, monetary authorities see the economy expanding 1.8%.
Author: Ricardo Aceves, Senior Economist