Operating conditions in the Austrian manufacturing sector continued to deteriorate in the final month of 2011 although, in line with weaker falls in output and new orders, the pace at which operating conditions worsened eased over the month. On the price front, falling raw material costs led to a slight drop in input prices.
The seasonally adjusted Bank Austria Manufacturing PMI® – a composite indicator designed to provide a single-figure snapshot of manufacturing performance – rose to 49.0 in December from 47.6 in the previous month. Although the reading indicated that business conditions deteriorated for the fourth consecutive month, the pace at which operating conditions worsened was the weakest in this sequence.
Production fell slightly during the month, with the rate of decline the weakest since July. According to respondents, fragile economic conditions had led to the reduction.
Problems in the wider economy also impacted negatively on new business as clients were reluctant to proceed with new projects. New orders decreased for the seventh consecutive month, and at a marked pace. New export orders also fell, and at a considerable rate.
Backlogs of work declined for the fifth consecutive month, and at a solid pace. That said, the latest depletion was the weakest in three months.
In spite of falls in output and new orders, manufacturers continued to take on extra staff in December. Moreover, the rate of job creation picked up slightly from that seen in the previous month.
Input costs decreased for the second time in the past three months, with lower prices for metals and plastics among the factors behind the latest reduction. Meanwhile, output prices increased, ending a two-month sequence of falling charges. That said, the rate of inflation was only fractional.
The performance of suppliers to Austrian manufacturers continued to deteriorate. However, the rate at which lead times lengthened was only modest, and weaker than that seen in the previous month.
Meanwhile, firms lowered their purchasing of inputs for the sixth month running, and at a marked pace. Respondents indicated that the latest decline partly reflected attempts to reduce stock levels amid weak underlying demand.
Stocks of purchases decreased marginally for the second consecutive month. Conversely, post-production inventories rose for the ninth time in the past ten months, and at the same pace as seen in November.
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