UNICREDIT BANK AUSTRIA ECONOMICS & MARKET ANALYSIS AUSTRIA

Transcription

1 UNICREDIT BANK AUSTRIA ECONOMICS & MARKET ANALYSIS AUSTRIA March 2019

2 Overview GDP real y/y change UniCredit Bank Austria Business Indicator Ongoing uncertainties dampen Austria s growth prospects The economic mood continues to worsen: The UniCredit Bank Austria sank to 2.5 points in February The consequences of the ongoing downturn in the export environment are being softened by the optimistic domestic mood The unemployment rate will drop to 7.3% in 2019, although the favourable trend will end in the middle of the year At 1.8% and 1.9% in 2019 and 2020 respectively, inflation will continue to surpass the comparable rate in the eurozone Despite this, Austria s economy continues to enjoy success in exports Extension of the ECB s liquidity measures through long-term loans; interest rate increases not appropriate in this environment for a long period Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Mar Jun Sep Dec Mar Jun Sep Oct Nov Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Jan Feb Source: UniCredit Research Author: Walter Pudschedl Imprint Published by UniCredit Bank Austria AG Economics & Market Analysis Austria Rothschildplatz Vienna Telephone +43 (0) Fax +43 (0) econresearch.austria@unicreditgroup.at 15 March 2019 UniCredit Research Page 2

3 In detail Lower growth prospects for 2019/20 The economic mood continues to worsen following its all-time high at the end of In February 2019, the UniCredit Bank Austria dropped to 2.5 points. Although the pace of decline has somewhat slowed recently, the indicator has now reached its lowest point in two-and-a-half years. Whilst the challenges in exports significantly worsened once again, the continuing domestic optimism curbed the drop of the UniCredit Bank Austria. The sharp decline in the sub-indicator for the international export environment weighted for the Austrian proportion of trade once again severely dampened the mood in the domestic industry. In contrast, optimism in construction even increased, whereas the mood in the service sector has barely changed, particularly since domestic consumers have even become slightly more confident due to the ongoing favourable trend in the labour market and the higher wage momentum in February. Since the second half of 2018, the economic engine has been ticking over slowly. The ongoing decline in the UniCredit Bank Austria and the actual economic data currently available do not lead to the expectation that the trend will change at the beginning of The current uncertainties surrounding the impending Brexit, the changes in global trade brought about by US policy, and the consequences of the new emission test cycle for the automotive industry continue to damage exports. Based on domestic demand, the Austrian economy will be able to continue its economic growth at the start of However, for the first time in two-and-a-half years, GDP growth in a single quarter will be less than 2% year-on-year. Even if the current uncertainties are at least partially assuaged by the middle of 2019, GDP growth in 2019 will still be significantly below that of the previous year. In 2019, we expect a decline in economic growth to at least 1.6% following the strong 2.7% of the previous year. In 2020, there will be two more hindering factors the continued slowing down of momentum in China, and an anticipated marked weakening of the US economy opening the door to a further decline in economic momentum. In any case, above all, the odds that growth will be weaker than we expect in 2019 are higher than the odds of a favourable surprise. UniCredit Bank Austria for Austria GDP (real; y/y change in %) UniCredit Bank Austria Source: Statistik Austria, Wifo, UniCredit Research, own calculations UniCredit Research Page 3 March 2019

4 Favourable trend on the labour market will come to an end in 2019 Higher inflation than in the eurozone has until now not led to any drop of competitiveness Fiscal stimuli at the right time No normalisation of monetary policy in sight The weaker economy will end the positive development of the Austrian labour market over the course of 2019 according to our assessment. From mid-2019, unemployment in Austria is expected to stop falling. Thanks to the strong start provided by weather conditions at the start of the year, the average annual unemployment rate in 2019 will nevertheless reach 7.3%, once again a level noticeably below that of the previous year. For 2020, however, no further improvement is to be expected. In this economic environment, inflation in Austria will be below the level of 2% in both 2019 and The lower price of oil will curb inflation. In addition, upward price pressure caused by demand will remain manageable in 2019/20. However, growth in wage momentum and strong domestic demand will boost price rises, particularly in the service sector, to the extent that inflation, at 1.8% in 2019 and 1.9% in 2020, will again be noticeably above the comparable rate in the eurozone. Since 2008, there has been a cumulative inflation upswing of around 5.5% compared to the eurozone. There are, however, at present no indications of declining competitiveness in Austrian export trade as a result of the comparably higher inflation. The Austrian market share (goods exports as a percentage of goods imports) has remained largely unchanged in the eurozone since 2008 at 4.4%. Net exports (goods exports minus goods imports) in relation to economic performance does indeed represent a liability. The balance, however, has even improved by one percentage point since By reducing unemployment figures in low-paid earners in mid-2018 and introducing the Family Bonus Plus at the beginning of 2019, the Austrian government has introduced measures to strengthen domestic demand in order to counteract the weakening effects on growth caused by export trade. If the economy continues to remain weak in the eurozone, fiscal measures at the European level may become necessary. However, because of the upcoming European Parliament elections, the odds of a sudden implementation of coordinated economic stimuli are limited. However, in order to restore a more favourable growth environment for the European economy, there is, in our opinion, less of an urgent need for fiscal economic stimuli than for measures to overcome the current uncertainties surrounding Brexit and the protectionist US trading policy. In particular, a solution must be found quickly in terms of the potential US tariffs on the automotive industry. Given the significant slow-down of economic growth and the declining inflation expectations in the eurozone, no further normalisation to the current monetary policy of the European Central Bank is expected for the time being following the end of its asset purchase programme at the end of In the current economic climate, the odds of increases to key interest rates seem remote and additionally, would make no sense. We do not expect any changes to the current interest rates until the end of The recently announced new series of quarterly Targeted Long-Term Refinancing Operations (TLTROs) will contribute to refinancing expiring long-term loans, and thus to limiting the potential negative effects on borrowing dynamics in the eurozone, although the two-year period from September 2019 to March 2021 may be rather short. The expiring long-term loans from the years 2016 and 2017 had a duration of more than four years. UniCredit Research Page 4 March 2019

5 Austrian Economic Forecast Forecast GDP (real, yoy in %) Industrial output (real, yoy in %) Private consumption (real, yoy in %) Investments (real, yoy in %) *) Inflation rate (change against prev. year in %) Unemployment rate (national definition) Employment (change against prev. year in %) **) Public-sector balance (in % of GDP) ***) Total public debt (in % of GDP) ***) *) gross fixed capital formation **) excl. maternity/paternity leave, military service and training programmes ***) 2018 own estimate Source: UniCredit Research UniCredit Research Page 5 March 2019

6 Disclaimer and Imprint We invite you to visit the economic analyses on Bank Austria s website: under "Direct access Markets & Research - Analyses & Research" in the section "Economic Research Austria" or directly at If you would like to receive information on our most recent publications by , please subscribe to the newsletter Bank Austria EconomicNews on the website. If you have further questions, please send us an to econresearch.austria@unicreditgroup.at Disclaimer of liability: This publication is neither a marketing communication nor a financial analysis. It contains information on general economic data. Despite careful research and the use of reliable sources, we cannot assume any responsibility for the completeness, correctness, up-to-dateness and accuracy of information contained in this publication. The opinions of the authors do not necessarily reflect those of Bank Austria and those of the companies which have engaged the services of the authors. The information contained in this publication is not to be interpreted as an offer or invitation for the sale or purchase of securities of any kind. We reserve the right to modify the views expressed in this publication at any time without prior notification. This information should not be interpreted as a recommendation to buy or sell financial instruments, or as a solicitation of an offer to buy or sell financial instruments. This publication serves information purposes only and does not replace specific advice taking into account the investor s individual personal circumstances (e.g. risk tolerance, knowledge and experience, investment objectives and financial circumstances). Past performance is not a guide to future performance. The information in this publication contains assessments of short-term market developments. We have obtained value data and other information from sources which we deem reliable. Our information and assessments may change without notice." Imprint Disclosure according to Sections 24 and 25 of the Austrian Media Act (Mediengesetz - MedienG): Published by: UniCredit Bank Austria AG 1020 Vienna, Rothschildplatz 1, which is also the media owner. Business objective: credit institution pursuant to Section 1 (1) of the Austrian Banking Act (Bankwesengesetz) Persons authorised to act on behalf of the media owner (Management Board): Robert Zadrazil, Dieter Hengl, Gregor Hofstätter-Pobst, Jürgen Kullnigg, Mauro Maschio, Doris Tomanek, Susanne Wendler. Supervisory Board of the media owner: Gianni Franco Papa, Ranieri De Marchis, Livia Aliberti Amidani, Christine Buchinger, Adolf Lehner, Mario Pramendorfer, Eveline Steinberger-Kern, Ernst Theimer, Andrea Umberto Varese, Carlo Vivaldi, Karin Wisak-Gradinger. Interests held in the media owner pursuant to Section 25 of the Austrian Media Act: UniCredit S.p.A. holds % of the shares in the media owner (key details of the shareholder structure of UniCredit S.p.A. are available at Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG, Region Wien (the Employees Council Fund of the Employees Council of employees of UniCredit Bank Austria AG in the Vienna area) and Privatstiftung zur Verwaltung von Anteilsrechten (a private foundation under Austrian law; founder: Anteilsverwaltung-Zentralsparkasse; beneficiary: WWTF Wiener Wissenschafts-, Forschungs- und Technologiefonds) have a combined interest of 0.004% in the media owner. UniCredit Research Page 6 March 2019