Bank Austria Economics and Market Analysis. Austrian Economy. January

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1 Bank Austria Economics and Market Analysis Austrian Economy January 9

2 Austrian Economy Author: Walter Pudschedl Imprint Published by UniCredit Bank Austria AG Economics and Market Analysis Hohenstaufengasse 6 Vienna Telephone + ()-97 Fax + ()- economic.research@unicreditgroup.at 9 January 9 January 9 Bank Austria Economics & Market Analysis

3 Austrian Economy Overview 7 Revision ) 8 Revision ) 9 Revision ) Revision ) GDP (real, in %) Inflation (CPI in %) ) Revision since the last report of December 8 Economy contracts by. per cent in 9 slow recovery in Global economic conditions have continued to deteriorate in the past few weeks. There are currently no signs of stabilisation. In Austria, the recession will therefore be more protracted and deeper than previously assumed. The economy is likely to contract by. per cent in 9, following GDP growth of.8 per cent in the past year. The economic low point is unlikely to be reached before the autumn of 9; the subsequent recovery will probably be a slow process. In, economic growth will remain at a weak.7 per cent. Sharp decline in inflation scope for further interest rate cuts Inflation has been falling sharply since October, thanks to declining oil prices. In December, it reached a temporary low of. per cent year-on-year, resulting in an inflation rate of. per cent for 8 as a whole. Inflation will continue to fall in the next few months, supported by weak economic activity. We expect inflation to average.9 per cent in 9. General expectations of a low inflation rate throughout the euro area will enable the ECB to make further cuts after lowering interest rates by bp in the middle of January. Key interest rates will fall from a current level of per cent to per cent by the middle of the year. Moderate expansion of retail sales will provide support in the recession Retail sales are growing only very slowly. Given the relatively high wage increases, falling inflation, lower interest rates and fiscal measures, retail sales may continue to expand at a moderate pace despite adverse developments on the labour market in 9. They could therefore support the Austrian economy during the global recession. average.8 per cent in 8 to 6.7 per cent in the current year. In light of weak economic growth, this will rise further to 7. per cent in. Declining demand for exports industry unlikely to recover before the end of 9 According to the latest survey among purchase managers, Austria's industrial output has been shrinking for over six months. In December, the output index fell to a new historic low. The sharp fall in foreign demand, now also reflected in declining Austrian merchandise exports, has an adverse impact on the industrial sector. The future outlook is bleaker on account of thinner order books. There are so far no signs that the downturn may be coming to an end. Industrial output is likely to contract significantly in 9 after marginal growth in the previous year. Late impact of economic programmes rise in debt and public deficit The government's economic support measures are only slowly gathering momentum; their full benefits will therefore only be discernible in the second half of the year. In combination with Germany's economic programme, which is important for Austria's export-dependent economy, this will cushion the impact of the economic crisis. The additional expenditure and lower revenue resulting from the government's two economic packages will however lead to a sharp rise in the public deficit in 9, combined with the adverse economic factors. We currently expect a budget deficit in the order of.8 per cent of GDP for 9. Labour market increasingly impacted by downturn sharp rise in unemployment in 9 The economic downturn is increasingly reflected in labour market data. Unemployment is rising and fewer jobs are available. The situation on the labour market will deteriorate markedly in the next few months when the economy continues to lose momentum. The about, additional persons looking for work will push the unemployment rate up from an Bank Austria Economics & Market Analysis January 9

4 Austrian Economy Austrian Economic Forecast forecast Real change in % GDP,,9,,,8 -,,7 Private consumption,,6,,,,8, Public consumption,,,,8,,6, Gross fixed capital formation,7,,6,7, -, -, Investments in plant and machinery -,8 6,9 -,8,9,8-7, -, Investments in construction,6 -,,,8, -,, Exports, 7, 7, 8,8,8 -,, Imports 9,8 6,, 7,, -,, CPI (change in %),,,,,,9,6 HCPI (change in %),,,7,,,9,6 Current account (in EUR bn),8,9 6, 8,8 8,,, Current account (in % of GDP),,,,,8,6,7 Employment in s change in %,,,6,9, -, -, Unemployment rate (nat. def.) 7, 7, 6,8 6,,8 6,7 7, Unemployment rate (EU def.),9,,8,,8,7, General gov. balance (in % of GDP) -, -, -, -, -,7 -,8 -, Public-sector debt (in % of GDP) 6,8 6,7 6, 9,6 9, 6, 66,8 Nominal GDP (in euro bn) Bank Austria Economics and Market Analysis January 9 Bank Austria Economics & Market Analysis

5 Austrian Economy - Forecast GDP (real),7 -,,6,8,,9,,,8 forecast -,,7 h Inflation (CPI) Jän Jän Jän Jän Jän Jän Jän 6 Jän 7 Jän 8 Jän 9 Wesentliche Rahmenbedingungen forecast forecast (Real change in %) GDP,9,,,8 -,,7 Eurozone GDP growth,9,6, -, Private consumption,6,,,,8, Public consumption,,,8,,6, US GDP growth,8,, -, Gross fixed capital formation,,6,7, -, -, UniCredit MIB Investments in plant and machinery 6,9 -,8,9,8-7, -, Investments in construction -,,,8, -,, Exports 7, 7, 8,8,8 -,, Imports 6,, 7,, -,, (yearly average) CPI (change in %),,,,,9,6 HCPI (change in % ),,7,,,9,6 USD per euro,6,7,7,8 forecast Employment (change in %)*),,7,, -, -, Crude oil (USD per brl)* Unemployment rate (nat. def.) 7, 6,8 6,,8 6,7 7, Unemployment rate (EU def.),,8,,8,7, -y gov. bonds,8,,, General gov. balance (in % of GDP) -, -, -, -,7 -,8 -, -months money,,,6,7 Public sector debt (in % of GDP) 6,7 6, 9,6 9, 6, 66,8 UniCredit MIB, Thomson Reuters * Futures *) excluding maternity/paternity leave, military service and training programmes Economics and Market Analysis 6 January 9

6 Austrian Economy - Data 6 7 IV 7 I 8 II 8 III 8 IV 8 /8 /8 /8 6/8 7/8 8/8 9/8 /8 /8 /8 Bank Austria Business Indicator,,,8,6,6,,8,8,8,,7,,8,,,, -,8 -, GDP growth (prev. quarter, annualised),,9,,,,,, Industrial confidence Eurozone Germany France Italy Netherlands Spain Bank Austria Industrial confidence Eurozone -6, -8,,,,, -, -9, -,8 -,, -, -6, -8,9 -,6-7,8 -, -, Bank Austria Purchase Manager s Index,,6 7,,,6, 9, 7, 8,9, 9,8 9,8 8, 7, 8,6 6,, 8,, Industrial confidence Austria , -,8 -, -6,9-9, -,6 -, -6, -, -8,6 Backlog of work New export orders Output expectations Industrial output change against previous year 7,, 7,7 6,,,6,,6,6,6,6, -,,7, -, change against previous month (saisonal adjusted),7,,9,,7, -,,,, -,, -,8 -, -,6, Foreign trade Exports (change against previous year in %),9, 9,, 6,6 6, 8,, -, 6,6, 7, 7,8 -,9 6, -, Exports (chg. against prev. month, s.a. in %, m mov. av.),,7,9,,,7 7,,9, -,6 -,, -, -,6 -, -, Imports (change against previous year in %),,9 8, 9,6 8,,6,,8 -,6 7,,7, 8, -,7,7,8 Imports (chg. against prev. month, s.a. in %, m mov. av.),,6,6, -, 6, 8,6,,6,,6,6, -,7 -,8 -, Ex-Im (m cum., euro bn) -, -,8 -,,,8,6 -,,,6,, -, -, -,, -, Construction Confidence indicator Bank Austria Economics and Market Analysis 6 January 9

7 Austrian Economy - Data 6 7 IV 7 I 8 II 8 III 8 IV 8 /8 /8 /8 6/8 7/8 8/8 9/8 /8 /8 /8 Retail trade Confidence indicator -, -,,,,,, -,9 -,7,,,6 -, -,6 -,6 -,6-9,9 -, -,8 Retail trade nom. (change against previous year in %),,,,,,,,,6,7 7,,,9 -,,, Retail trade nom. (change against previous year in %, mav.),,6,,,8,,6,8 Retail trade real (change against previous year in %),6,,7,, -,, -, -,,,6 -,6, -,9,, Retail trade real (chg. against prev. month in %, s.a., mav.),,, -,, -, -, -, -, -,,, Automobile trade nom. (change against prev. year in %),7 -,,8,,9,6, -, -, 7,8, 7,, -8,,8, Tourism Overnight stay (change against previous year in %) -,,,7, 7,, -6,,,7 -, 6, -,,,8 -,, Labour market Employment*) (change against previous year in %),7,,7,,,,7,,,,6,7,9,,,,9,6,9 Employment (s.a., change against previous month in %),,,, -,,, -,, -, Unemployed (change against previous year in ) Unemployment rate (in %, s.a.) 7, 7, 6,8 6, 6,,7,8,9 6,,7,8,8,8,9,9,9 6, 6, 6, Prices CPI (change against previous year in %),,,,,,,6,7,,,,7,9,8,7,8,,, HCPI (Change against previous year in %),,,7,,,,7,7,,,,7,,8,6,7,,, Prices of raw materials (change against prev. year in %), 8,,, 8,8 6, 67,7,6-9, 8,6,6 7, 76, 69,, 8,6-9,9 -,6 -,6 Crude oil (change against previous year in %),8,,,7 8, 66,9 8,7 7, -6,8 68, 66, 89, 9, 8,6 6,6, -, -,7 -, Financial market M Euribor,,9,8,8,7,9,86,98,,6,78,86,9,96,97,,,,7 -year government bonds,9,7,8,9,,7,,8,,99,,8,7,7,,,,,7 USD per euro,,,6,7,,,6,,,,8,6,6,8,9,,,7, Total loans (change against previous year in %, eop),7,8,7,6,,9, 6,,,,6,6,6,9 6, 6,9 Consumption loans (change against prev. year in %, eop) 6,,,,7,,6,,6,,7,9,,,, 6,6 *) excluding maternity/paternity leave, military service and training programmes Bank Austria Economics and Market Analysis 6 January 9

8 Austrian Economy - Graphs GDP and industrial production GDP (yoy in %, real; left scale) Industrial production (yoy in %; m avg.; right scale) Industrial and consumer confidence Industrial confidence Consumer confidence Austria's exports and imports Bank Austria Business Indicator Imports (yoy in %; m avg.) Exports (yoy in %; m avg.) GDP (yoy in %, real) Bank Austria Business Indicator Economics - 98 and Market Analysis Economics and Market Analysis 6 January 9

9 Austrian Economy - Graphs Unemployed Unemployed (yoy in,; right scale Unemployment rate (in %; seasonally adjusted; left scale) Employment yoy in %, excl. matern./patern. leave, military serv. and training progr Inflation rate Retail trade HCPI (yoy in %) CPI (yoy in %) Retail trade (yoy in %; real; m avg.; left scale) Confidence indicator (right scale) Economics and Market Analysis 6 January 9

10 Austrian Economy We invite you to visit the economic analyses on Bank Austria s website: under "Analyses & Research" in the section "Economic Research" 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 economic.research@unicreditgroup.at Disclaimer of liability 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. Bank Austria Economics & Market Analysis January 9