SECTOR OUTLOOK INDICATORS AND UP TO DATE FIGURES

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1 SECTOR OUTLOOK INDICATORS AND UP TO DATE FIGURES October 2017 STILL ONGOING GROWTH DURING FOURTH QUARTER Exports already suffer the impact of the strong euro; Russia is slowly coming back Positive outlook for the fourth quarter According to manufacturers metal prices keep rising

2 General Indicators 02 Short-term expectations Positive short-term outlook for the fourth quarter. Production - last 3 months The metal technology industry keeps growing during the third quarter. Situation machinery A good order basis allows to expect sustainable growth rates in the machinery industry. Situation metalware Metalware manufacturers are satisfied with their order situation. Business situation 6 months from now Encouraging medium-term outlook in the machinery industry; in the metalware sector all signs point to a slower growth in the medium term. Exports Slower growth due to significantly weaker second quarter; weakness of the US dollar already appreciable. OECD Leading Indicator Increasing momentum from Asia to be expected, whereas growth in the USA is declining. Purchasing Manager Index The Austrian industry remains optimistic, but increasingly cautious. STATUS QUO Metalltechnology Austria 01-06/ % yty % price adjusted Production Value (in million Euros) ,00% 2,00% Exports (in million Euros).835 6,80% 4,80% Employees ,64% Exportratio 79,9% Average wages - blue collar ,50% Average wages - white collar ,50% GDP Share Metaltechnology 6,1% Export Share Metaltechnology 23,7% Source: Statistik Austria; Konjunkturstatistik nach Kammersystematik *Exportquote: Auslandsaufträge/Gesamtaufträge; Kammersystematik Sector Outlook July 2017 Identify the trends at an early stage. Business survey The evaluation of the business survey for the machinery and metalware industry throws a light on the most important economic issues concerning the current situation and prospects. In the past, the business survey has always anticipated to a high degree the actual development as reflected afterwards by official economic statistics. The following pages contain the findings of the survey, customized for the Machinery and Metalware Industry. For further details please contact: Martin Baminger Telefon:+43 (0) baminger@fmti.at ASSOCIATION OF METALTECHNOLOGY INDUSTRIES 1045 Wien, Wiedner Hauptstraße 63 Telephon: , FAX: Mail: office@fmti.at An Organisation of the Austrian Federal Economic Chamber

General Indicators 03 OECD Leading Indicator 100,6 Eurozone USA Top 5 Asia China India 100,4 100,2 100,0 99,8 99,6 99,4 99,2 99,0 Sep-2015 Oct-2015 Nov-2015 Dec-2015 Jan-20 Feb-20 Mar-20 Apr-20

3 General Indicators 03 OECD Leading Indicator 100,6 Eurozone USA Top 5 Asia China India 100,4 100,2 100,0 99,8 99,6 99,4 99,2 99,0 Sep-2015 Oct-2015 Nov-2015 Dec-2015 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-2017 Feb-2017 Mar-2017 Apr-2017 May-2017 Jun-2017 Jul-2017 Source: OECD Database OECD Leading Indicator: The OECD Leading Indicators show the turning points of a business trend up to 6-9 months in advance. For every country or region different indicators are combined. The GDP trend line serves as reference series, the leading indicators are meant to detect at an early moment the turning points of economic growth. Therefore it is not the index value as such but the trend of the indicator which really counts. The used indicators show fluctuations similar to the GDP growth rates, ideally a little in advance. In the case of Austria, the selected indicators are e.g.: industrial production, incoming orders, IFO-index, interest premiums, consumer confidence index and unemployment rate. The OECD Leading Indicators show a weaker economic trend in the USA Simultaneously we could observe two turning points in the OECD Leading Indicators: downwards in the USA (i.e. transition from upswing to downturn) and upwards in Asia (top 5 countries). For autumn we expect a weakening economic trend in the USA and an upswing in Asia. However it is necessary to make distinctions between several countries. In China we had an important turning point in January, in India a little later. According to the Leading Indicators these countries may expect sustainable growth. This trend has not been confirmed so far by our shrinking exports to China; however we ll only see the figures for the third quarter at the end of the year. Europe still enjoys a stable upwards trend which is also reflected by a stronger euro. This, of course, is also a risk. From the second quarter of 2017 exports to the USA began to suffer from the strength of the euro compared to the US dollar. For further information on the methodology: leading-indicators/

Outlook 04 Business-cycle clock Metaltechnology Austria 01/2000-09/2017 every data point represents one month Source: Wifo Konjunkturtest, Metalltechnische Industrie 2017 The business-cycle clock :

production (horizontal axis) and production expectations (vertical axis).

4 Outlook 04 Business-cycle clock Metaltechnology Austria 01/ /2017 every data point represents one month Source: Wifo Konjunkturtest, Metalltechnische Industrie 2017 The business-cycle clock : The business-cycle clock is a 4-phase graphic representation, an excellent tool for following and gauging the development of business-cycles, based on the companies monthly assessment of current production (horizontal axis) and production expectations (vertical axis). The two values combined yield monthly data points, which -depending on the economic situation- are in one of the four quadrants. In the ideally typical case, the branch moves during a business cycle clockwise through all four quadrants. The greater the deviation from the zero-line, the more pronounced the business-cycle. Continued growth Results of the economic survey concerning short-term prospects in the metal technology industry are positive. The optimism which had declined somewhat during the last few months is slightly recovering. The business-cycle clock shows a solid growth period. The economic trend seems to be sustainable, not least due to production increases during the last months. Production prospects After several months of decline, the mood is reversed. This does not mean that we had a pessimistic sentiment during the last months, but the optimism had been damped. In September, entrepreneurs were more confident about the rest of the year. The fourth quarter still should bring about a solid growth. In the short term, metalware manufacturers are slightly more optimistic than machine builders, in the medium term it is just the other way round. Current production trend Only 7% of the manufacturers of the metal technology industry are reporting declining production figures, whereas 36% of the entrepreneurs report an increase during the last 3 months. At the moment, production grows a little faster than in August, the share of companies with a declining production had not been so low since May (5%). Even better is the situation in the metalware sector with 4% of negative and 39% of positive reports. Growth is gaining some momentum, but growth rates will decline again in the future. However the metal technology industry will keep growing for some time.

5 Outlook 05 Own Business Expectation in 6 Months Saldo of positive and negative replies 0,30 0,20 Optimism decreased in the metalware sector in the past months 0,10 0,00-0,10-0,20-0,30 Machinery Metalware -0,40 12/ / / / / / / / / / / / / /20 06/20 09/20 12/20 03/ / /2017 Source: Wifo Konjunkturtest, Metalltechnische Industrie 2017 Bright prospects for the start of 2018 The good news first: all in all, entrepreneurs of the metal technology industry expect a positive business trend, also in the medium term. In view of the encouraging signs for 2018, it is unlikely that the upswing will be followed immediately by recession. At least at the beginning of 2018 we should enjoy a stable or even positive situation. The two subbran- ches of the metal technology industry show slightly different trends. During the last two months, machine builders have been very optimistic, whereas in the metalware branch optimism is already a bit subdued. Obviously metalware manufacturers have already passed the peak, while the curve of the machinery sector still moves upward.

6 Outlook 06 Sales Price of Metals - Expectations Saldo of positive and negative replies of metalproducers 0,40 0,30 Further price increases in sight 0,20 0,10 0,00-0,10-0,20-0,30-0,40 12/ / / / / / / / / / / / / /20 06/20 09/20 12/20 03/ / /2017 Source: Wifo Konjunkturtest, Metalltechnische Industrie 2017 First trend reversal in metal prices Austrian metal manufacturers expect metal prices to rise. Even if we had rather volatile figures during the last few months, we are still in a growth zone, i.e. metal manufacturers anticipate further price increases. Due to the relatively small number of Austrian manufacturers, values fluctuate a lot from month to month, but the trend is clear.

7 Sector Outlook Machinery 07 Machinery Incoming Orders Billions 2,40 2,20 April - June: + 13,7 % yty 2,00 1,80 Trend 1,60 1,40 1,20 1,00 1,70 1,33 1,53 1,51 1,33 1,42 1,62 1,81 1,68 1,36 1,48 1,67 1,42 1,39 1,51 1,45 1,33 1,79 1,60 1,67 2,11 1,60 1,63 2,36 1,47 1,69 1, Source: Statistik Austria Konjunkturstatistik NACE 28, ,10 0,05 0,00 no signs of a downswing -0,05-0,10-0,15-0,20 Average -0,25-0,30-0,35-0,40 12/ / / / / / / / / / / / / /20 06/20 09/20 12/20 03/ / /2017 The slow decline of the trend line since its peak in March shows that the growth had its top level in summer of 2017 and is now slowly levelling off. The 70% increase of orders (over the previous year) registered in March was an extreme outlier and due to one single order which pushed the total value and should not be overinterpreted. The level of cancelled orders during the last 3 months was very low (-76%). All in all, actual figures confirm the trend reflected in the economic survey. Order Backlog Machinery Saldo of positive and negative replies Source: Wifo Konjunkturtest, Metalltechnische Industrie 2017 The continued positive backlog of orders in the machinery sector confirms the optimistic outlook. We can count on a high production level for the next few months. Even if growth is apt to decline we see no signs of a downturn. 85% of machine builders consider their own backlog of orders as sufficient or more than sufficient, only 15% consider it insufficient.

Sector Outlook Machinery 08 Machinery Employees June2017: +1,2 % yty 76.200,00 75.700,00 75.200,00 74.700,00 74.200,00 73.

8 Sector Outlook Machinery 08 Machinery Employees June2017: +1,2 % yty , , , , , ,00 For more details on the different sectors and a wealth of indicators for the metal technology industry please visit > Facts & Figures , , , Source: Statistik Austria - Konjunkturstatistik NACE 28, 2017 More than 76,000 persons are currently employed in the Austrian machinery industry, a permanently high value since the start of the year (1.2% higher than in 20). Due to the excellent order situation and rising capital expenditure we may expect a further increase of the number of employees.

9 Sector Outlook Metalware 09 Metalware Incoming Orders Billions 1,30 1,20 April - June: 9,9% yty 1,10 1,00 Trend 0,90 0,80 0,70 0,60 1,09 0,92 1,05 1,06 0,80 0,96 1,15 1,13 0,79 0,85 1,01 1, 1,02 1,01 1,13 1,11 0,92 1,07 1,05 1,11 0,97 0,99 0,99 1,25 1,05 1,32 1, Source: Statistik Austria - Konjunkturstatistik NACE 25, 2017 Real figures from the second quarter of 2017 show again an excellent level of incoming orders, which interestingly so far has not nearly been reflected by production growth (see status quo - the production increase during the 1st half-year amounts to 4%). During the last months the almost complete absence of order cancellations (-77% in the 2nd quarter) was also quite remarkable. In the first half-year, the trend of increasing new orders is confirmed by real figures. 0,20 upwards trend continues 0,10 0,00-0,10-0,20 Average -0,30-0,40-0,50 12/ / / / / / / / / / / / / /20 06/20 09/20 12/20 03/ / /2017 Metalware Order Backlog Saldo of positive and negative replies Source: Wifo Konjunkturtest, Metalltechnische Industrie 2017 In the third quarter of 2017 incoming orders registered a surprisingly strong increase, which points to a good fourth quarter of the year. This means that the trend of declining growth rates in the branch might be postponed. Currently metalware manufacturers are very satisfied with their volume of orders.

Sector Outlook Metalware 10 Metalware Employees 66.000,00 June 2017: +0,01% yty 64.000,00 62.000,00 60.

10 Sector Outlook Metalware 10 Metalware Employees ,00 June 2017: +0,01% yty , , ,00 For more details on the different sectors and a wealth of indicators for the metal technology industry please visit > Facts & Figures , , Source: Statistik Austria - Konjunkturstatistik NACE 25, 2017 Employment in the metalware sector reached its peak in June of 2017, just over the value of July 20. At present the metalware branch has a workforce of 66,318 employees (own personnel).

11 External Trade 11 The Top Trading Partners of Metaltechnology Austria - Export Growth Jan - Jun Export growth Total exports:+6,8% Export Shares: Total Europe: 73% Asia: 11% America: 14% Czech. Rep. -0,4% UK -1,3 % Poland -4,4% Hungary +2,7% Q2 2017: +4,1% Germany: +1,8% USA: -0,3% China: -6,9% Russia: +65,4% China -14,3 % Switzerland -1% Germany +11,3 % Italy +9,2 % France +9,2 % USA +15,5 % Source: Statistik Austria, Außenhandel Sonderauswertung Metalltechnische Industrie 2017 Export balance remains positive; export growth loses momentum After an unusually dynamic first quarter of 2017, growth has slowed down in the second quarter (4.1%). In total, our balance shows an increase of 6.8% during the first 6 months of The apparently impressive growth of exports to the USA of 15.5% is less encouraging if we observe the trend - in the second quarter exports to the USA declined by 0.3%, a consequence of the weak US-dollar. We expect a further reduction in the second half-year. Russia still has not managed to return to the top ten of Austrian export markets. However, with an increase of 65% in the second quarter, Russia obtained the 12th rank. China s share is still a bit smaller than in other countries. China ranks sixth among the main export markets of the branch.

12 External Trade 12 Top and Flop - Tradingpartners Jan-June in Million Euros Germany 344 USA 202 Russia 82 France 79 Changes in absolute Values Italy Australia Pool of top 50 trading partners Saudi- Arabia -15 Liechtenstein -15 Poland -19 China ,00-50,00 0,00 50,00 100,00 150,00 200,00 250,00 300,00 350,00 Source: Statistik Austria, Außenhandel Sonderauswertung Metalltechnische Industrie 2017 First signs of life from Russia Taking its exports as a whole, Russia still is far below the values we had seen a few years ago, but an increase of 82 million euro in the first half-year is an encouraging sign of life and perhaps the start of a trend reversal. The increase in the USA is likely to be short-lived, the weakness of the US-dollar already affected the second quarter. The decline in China is a cause for concern. The Chinese export market has fallen short of our expectations during the last few years. More and more industrial goods are being produced locally in order to reduce the export dependency. Once more, Germany is the export engine of the Austrian metal technology industry (+ 344 million euro).

13 What do forecasts say 13 Purchasing Manager Index Austrian Industry ,8 66,8 66,2 68,1 66, ,7 63, ,5 53,4 52,1 53,5 53,9 55,4 56,3 57,3 57,2 56,8 58, , ,1 59,4 49 Apr. Mai. Jun. Jul. Aug. Sep. Okt. Nov. Dez. Jan. 17 Feb. 17 Mär. 17 Apr. 17 Mai. 17 Jun. 17 Jul. 17 Aug. 17 Sep. 17 Production Expectations New Orders PMI Source: BA - Einkaufmanagerindex Waning growth momentum All partial indicators of the Austrian industry show the same drop in September, however on the basis of a high starting point. This confirms the trend of the last months, also reflected by the metal technology industry: we still expect a positive trend during the next months, but with slightly lower growth rates. Forecast September in % IMPRESSUM METALTECHNOLOGY AUSTRIA 1045 Vienna, Wiedner Hauptstraße 63 Tel.: FAX: Mail: office@fmti.at An Organisation of the Austrian Federal Economic Chamber Published in Vienna 10/2017 Source: Unicredit Prognose GDP 2,8 2,8 Gross Capital Formation 4,2 3,0 Industrial Production 5,7 4,9 Exports of Goods 5,5 4,8 Inflation 1,9 1,8 Forecasts, especially for 2017, improved in September, some of them significantly; the industrial production will obtain an important growth this year. Economists also expect a solid albeit less pronounced growth for next year.

Austria s economy set to grow by close to 3% in 2018

Austria s economy set to grow by close to 3% in 218 Gerhard Fenz, Friedrich Fritzer, Fabio Rumler, Martin Schneider 1 Economic growth in Austria peaked at the end of 217. The first half of 218 saw a gradual