Business Indicator UNICREDIT BANK AUSTRIA ECONOMICS & MARKET ANALYSIS AUSTRIA

Transcription

1 UNICREDIT BANK AUSTRIA ECONOMICS & MARKET ANALYSIS AUSTRIA August 2018

2 Overview GDP real y/y change UniCredit Bank Austria Business Indicator Domestic demand supports solid growth in Austria UniCredit Bank Austria Business Indicator starts the third quarter of 2018 at 3.6 points: despite a decline after the alltime high at the turn of the year, the indicator remains clearly above the long-term average Consumption and investments stabilize the pace of growth at over 2 percent Effects of the Turkish crisis manageable, as less than 0.5 percent of Austrian demand depends on Turkey Despite higher global risks: economic growth expected to reach 2 percent in 2019, after 2.8 percent in 2018 Improvement in the labor market is stagnating: after 7.7 percent in 2018, the unemployment rate will fall only slightly to 7.6 percent in 2019 Inflation visible since the middle of the year is only temporary: average annual inflation expected to rise to 2.2 percent in 2018, decline to 2.0 percent in 2019 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 Jul 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 16 August 2018 UniCredit Research Page 2

3 In detail Rising risks in the export environment, but risk of the Turkish crisis manageable for Austria At the beginning of the third quarter, the moderate decline in economic sentiment in Austria continued. Starting from a phase of clearly exuberant optimism, which was reflected in an alltime high of 4.5 points in December last year, the mood in the Austrian economy declined for the seventh month in succession in July. Despite the seventh decline in a row, the UniCredit Bank Austria Business Indicator continues to clearly exceed the long-term average at 3.6 points, which speaks for a sustained solid growth rate in the coming months. The easing of economic sentiment in recent months is noticeable on a broad sectoral level and is reflected in the attitudes of both producers and consumers. In July, Austria's positive economic outlook declined again somewhat. Business prospects in the export-dependent industries in particular are currently being limited by a further increase in global economic risks. On the other hand, however, there is a very clear improvement of the mood in the construction business. The slight decline in the UniCredit Bank Austria Business Indicator in July is mainly attributable to the rising challenges in exports. In the past six months, a series of new geopolitical risks and increasing protectionist tendencies have worsened the international environment for Austria's export-oriented industrial enterprises. The sub-indicator, which reflects the mood and prospects in the sales markets of domestic industry, exerted the strongest influence on the decline in the UniCredit Bank Austria economic indicator in July. Under the impression of increased uncertainty, which has a dampening effect on incoming orders, the mood in Austrian industry has also declined. For some time now, refinancing difficulties have been expected for Turkey due to the double deficit in the current account and the state budget, although the political events of recent weeks have also led to a particularly sharp fall in the value of the Turkish currency. Despite the severity of the crisis and although a stabilization of the situation is desirable for many reasons, not least to reduce the levels of uncertainty, the direct and indirect effects on the economy in the euro area and Austria remain rather small. With an export share of 0.9 percent, Turkey is only Austria's number 20 export partner, and with less than 1 percent of all Austrian direct investments in Turkey, the effects of the Turkish crisis on Austria's economy remain manageable. Overall, less than 0.5 percent of Austria's demand depends on Turkey. UniCredit Bank Austria Business Indicator for Austria GDP (real; y/y change in %) UniCredit Bank Austria Business Indicator Source: Statistik Austria, Wifo, UniCredit Research, own calculations -2 UniCredit Research Page 3 August 2018

4 Stable growth prospects for the second half of the year are above average Unemployment rate stagnating Inflation on the rise for the time being Despite the high employment dynamics and rising wage growth that are spurring consumption, consumer confidence fell in July, and optimism in the services sector also declined. In July, only the construction industry countered the general slight downward trend in economic sentiment. A sharp increase in the number of orders on top of already high capacity utilization and a high degree of price assertiveness in this economic situation have raised business expectations for construction to a new all-time high. In the first half of the year, GDP growth in Austria was 2.8 percent. After a strong start to the year, however, economic growth slowed noticeably in the second quarter of The current UniCredit Bank Austria Business Indicator and a number of other existing early indicators signal a flattening of the economic slowdown and a stabilization of the growth rate. For the second half of the year, we expect continued broad-based economic growth in the range of 2.5 to 3 percent. In addition to domestic demand, exports will also contribute to the GDP increase, which we expect to continue at 2.8 percent for 2018 as a whole. However, exports are not expected to support growth as strongly in the second half of the year. On the one hand, global trade has lost momentum. On the other hand, the good domestic economy continues to ensure a high level of import momentum. To an even greater extent than in the first half of the year, economic growth in the coming months will therefore be driven by domestic demand. Although private consumption will not quite be able to maintain the pace set so far, the good mood of consumers, the favorable situation on the labor market, and the increased wage dynamics continue to provide plenty of tailwind. Private consumption is expected to grow by 1.8 percent, the strongest growth in over a decade. Investments will also continue to grow strongly in the second half of the year. The degree of capacity utilization in the domestic economy, which is well above the long-term average, suggests a continuing need for invest in expansion in order to fulfill orders. For 2019, we expect economic growth of 2 percent, based on a continued strong domestic economy. With somewhat less support than in the current year, both private consumption and investment will contribute to growth above potential next year, for the third year in a row. However, the prospects for foreign trade are subject to high uncertainties. Although the available indicators show a stabilization of global trade, the tightening of economic sanctions, and the protectionist US customs policy entail a high economic risk, particularly for the exportoriented Austrian economy. In the first half of 2018, the unemployment rate averaged 7.9 percent, 0.9 percentage points below the previous year. However, seasonally adjusted data show that the unemployment rate has largely stagnated since the beginning of 2018 and even showed a slight upward trend to 7.8 percent in July. This is due firstly to the slowdown in employment growth on a monthly basis. Secondly, the number of job seekers has been rising again for two months including in July, and thirdly, training provision has been reduced. As a result, many previous training participants are now appearing in the unemployment statistics again. The improvement trend on the labor market in Austria is coming to an end. The unemployment rate will largely stagnate in the second half of the year because of lower employment growth due to the economic situation, a stable increase in the labor supply, and probably less support from training measures. On average, we expect an unemployment rate of 7.7 percent for The economy will be strong enough in 2019 to generate a sturdy increase in employment, but at around 1.2 percent year-on-year it will only be about half as strong as in This means that the increase in employment will no longer be significantly higher than that of the labor supply, which is mainly determined by immigration. Unless the extent of training changes significantly, the unemployment rate will fall very little at best. We expect an annual average unemployment rate of 7.6 percent in The slight upward trend in inflation in Austria that began in May will continue over the coming months. In July, annual inflation is expected to have passed the 2 percent mark for the first time. Due to the higher oil price and the weaker euro exchange rate compared to the spring, inflation rates of as much as 2.5 percent are expected in the further course of the year. Average UniCredit Research Page 4 August 2018

5 annual inflation is 2.2 percent. The inflation rate in 2018 will thus be slightly higher than the 2.1 percent of the previous year. By spring 2019 at the latest, when the strong price rises of the current year fall out of the calculation, the oil-price-induced rise in inflation will end. Even though the continued strong domestic economy could lead to some price increases on the demand side, the average inflation rate of 2.0 percent in 2019 will be slightly lower than in the current year. 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 Source: UniCredit Research UniCredit Research Page 5 August 2018

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 (Chairman of the Management Board), Romeo Collina (Deputy Chairman of the Management Board), Dieter Hengl, Gregor Hofstätter-Pobst, Jürgen Kullnigg, Doris Tomanek. Supervisory Board of the media owner: Erich Hampel (Chairman of the Supervisory Board), Ranieri De Marchis (Deputy Chairman of the Supervisory Board), Livia Aliberti Amidani, Christine Buchinger, Adolf Lehner, Gianni Franco Papa, Mario Pramendorfer, Eveline Steinberger-Kern, Ernst Theimer, Andrea Umberto Varese, 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 August 2018