Bank Austria Economics and Market Analysis. Austrian Economy. May

Bank Austria Economics and Market Analysis Austrian Economy May http://economicresearch-e.bankaustria.at

Author: Walter Pudschedl Imprint Published by UniCredit Bank Austria AG Economics & Market Analysis Austria Nordbergstraße 9 Vienna Telephone + ()555-957 Fax + ()555-5 E-Mail: econresearch.austria@unicreditgroup.at As of May Bank Austria Economics & Market Analysis Austria page

May Overview 8 Revision ) 9 Revision ) Revision ) Revision ) GDP (real, in %). -... Inflation (CPI in %)..5.8. ) Revision since the last report of April Stagnation in first quarter sharp upturn likely in second quarter Inflation remained at per cent in April oil price continues to drive developments Robust retail sales in first quarter medium-term outlook more moderate Labour market continues to ease at present no further deterioration over 9 Manufacturing currently experiences upturn but medium-term outlook for manufacturing and exports is fragile Budget discussions gain momentum public debt is likely to rise until GDP stagnated in the first quarter of. However, numerous leading indicators and sentiment indicators show that the recovery of the Austrian economy has not come to a standstill in the spring. We therefore anticipate a noticeable upturn for the second quarter. Although the economic outlook beyond the second quarter is more moderate, it is not unfavourable. We are maintaining our GDP forecast for as a whole at. per cent. Given the lacklustre nature of all demand components, economic growth is unlikely to accelerate markedly in the medium term. In April, y-o-y inflation persisted at. per cent as a result of the rise in oil prices and the change in the euro/us dollar rate. Inflation is likely to remain at around this level in the coming months. We anticipate an average inflation rate of.8 per cent for the whole of. Supported by economic recovery and a noticeable easing of the labour market, Q retail sales were very positive. Although the marked improvement in consumer sentiment in April suggests that this trend could continue for some months yet, the general economic climate will limit growth to moderate proportions in the medium term. Overall, retail sales, which expanded by just over per cent in real terms in 9, will grow at more or less the same rate in the current year. Following growth of. per cent last year, private consumption will accelerate slightly in the current year at the expense of the savings ratio as economic recovery creates more favourable conditions. In April, positive signals in the labour market were partly overshadowed by some disparate developments which also dim the further outlook. The optimism is somewhat dampened by a slower decline in unemployment, and especially by the current employment trend. From a medium-term perspective, the situation on the labour market is also impacted by the persistently high number of trainees participating in training programmes who will re-enter the labour market in the coming months. Given the relatively slow and tentative pace of economic recovery in Austria, the situation on the labour market is therefore still a cause for concern. However, current signals suggest that the situation should not deteriorate further in as a whole compared to the previous year. The most recent survey among Austrian businesses reveals growing signs of a dynamic, but also sustainable, upturn in Austrian manufacturing. The many positive components of the results of the recent Bank Austria Purchase Manager s Index suggest that Austrian manufacturing may experience uninterrupted growth in the current year and expand by at least per cent in real terms. This development is accompanied by brighter export prospects. Here, too, we are assuming real y-o-y growth of about per cent for. Although there are signs that revenue trends may be stabilising, we still expect Austria s budget deficit to widen to up to 5 per cent of GDP in in light of only moderate economic growth and the absence of structural changes. It is becoming more apparent that instead of a more far-reaching reform of areas such as the pension, social and health-care system ( administrative reform ), efforts to reduce new debt to under per cent of GDP by will be limited to selected measures. In other words, higher taxes and a cut in social security benefits and investment expenditure instead of more efficient structures. Bank Austria Economics & Market Analysis Austria page

May Austrian Economic Forecast forecast 5 7 8 9 Real change in % GDP.5.5.5.5. -... Private consumption...8.8.8... Public consumption..7.7.7...5. Gross fixed capital formation*).7...8. -7.8 -.. Investments in plant and machinery -.8. -.5 5.. -. -.8. Investments in construction. -.7.8.9.8 -. -.. Exports. 7. 7.5 9..8-5.5.. Imports 9.8. 5. 7. -.7 -...9 CPI (change in %)...5...5.8. HCPI (change in %)...7...5.8. Current account (in EUR bn) 5. 5. 7. 9. 9.. 7. 7.5 Current account (in % of GDP)...8....5. Employment in s**) 79 7 59 5 7 change in %.7...9. -. -..5 Unemployment rate (nat. def.) 7. 7..8. 5.8 7. 7. 7. Unemployment rate (EU def.).9 5..8..8.8 5. 5. Unemployed (annual average in,) 5 9 General gov. balance (in % of GDP) -. -. -. -. -. -. -5. -. Public-sector debt (in % of GDP).8.9. 59.5..5 8.7 7.5 Nominal GDP (in euro bn) 5 7 8 77 8 9 *) excluding changes in inventory **) excluding persons drawing maternity benefits, military service and training Bank Austria Economics & Market Analysis Austria Bank Austria Economics & Market Analysis Austria page

- Forecast GDP (real) Inflation (CPI) 5.7.5.5.5.5 forecast.....5.8 - - - - -. - - 5 7 8 9 / / / / / /5 / /7 /8 /9 Wesentliche Rahmenbedingungen / estimate forecast forecast 7 8 9 8 9 (Real change in %) GDP.5.5. -... Eurozone GDP growth. -..9. Private consumption.8.8.8... Public consumption.7.7...5. US GDP growth. -...5 Gross fixed capital formation..8. -7.8 -.. UniCredit MIB Investments in plant and machinery -.5 5.. -. -.8. Investments in construction.8.9.8 -. -.. Exports 7.5 9..8-5.5.. Imports 5. 7. -.7 -...9 (yearly average) 8 9 CPI (change in %).5...5.8. HCPI (change in % ).7...5.8. USD per euro.7.9.9.9 forecast Employment (change in %)*)..9. -. -..5 Crude oil (USD per brl)* 97 75 77 Unemployment rate (nat. def.).8. 5.8 7. 7. 7. Unemployment rate (EU def.).8..8.8 5. 5. -y gov. bonds..9.5.8 General gov. balance (in % of GDP) -. -. -. -. -5. -. -months money...7. Public sector debt (in % of GDP). 59.5..5 8.7 7.5 UniCredit MIB, Thomson Reuters * Futures *) excluding maternity/paternity leave, military service and training programmes Economics and Market Analysis Austria May

- Data 7 8 9 I 9 II 9 III 9 IV 9 I 8/9 9/9 /9 /9 /9 / / / / 5/ Bank Austria Business Indicator.9.7. -. -. -. -... -.9 -. -....... GDP growth (prev. quarter, annualised).5.5. -. -8.5 -..8.. Industrial confidence Eurozone 5-9 -8 - - - -9 - -5 - - -9 - - - - -7 Germany 7-8 - - - -5-7 - -9-9 - - -9-5 - -9-5 France - - -8-7 - - -7 - -7 - - -8 - - - - -8 Italy -9 - - -8 - -5-9 - - -7-7 - - -9-8 -7 Netherlands 5 - -8 - - -7 - -7 - -5 - - - -9-7 - - Spain - -8 - -7-5 -9 - - -7-8 - -5 - - - -8 - Bank Austria Industrial confidence Eurozone 5-9 -9 - - -7-9 -9-5 -5 - -9 - - - -9 - Bank Austria Purchase Manager s Index 57. 5.5 7...8. 8.9 5. 5. 9.9 5. 5. 9.9 5.8 5.8 55. 5.7. 58. Backlog of work 58 5 5 5 5 57 55 5 5 5 5 5 58 58 58 New export orders 58 5 5 5 5 57 55 5 57 5 5 5 59 59 Output expectations 58 55 7 5 5 58 5 5 5 5 5 55 59 Industrial confidence Austria - -9 - - -7 - -7 - -5 - - - -9 - - - Industrial output change against previous year 7.7..9 -. -.5 -.5 -. -. -. -.7-7. -. -. -..5 -.8 change against previous month (saisonal adjusted).7. -.7 -. -. -.5.5...9 -..9.9 -. -..5 Foreign trade Exports (change against previous year in %) 9.5.5.5-9.9 -.9 5...5 -. -. -7.9 -.5 -.8 -. 5.5 Exports (chg. against prev. month, s.a. in %, m mov. av.). -. -.9 -. -9.9 -.. -.8...8.... Imports (change against previous year in %) 8. 9..7-8. -8.8... -8.5-5.5 -.7-9. -.7 -.. Imports (chg. against prev. month, s.a. in %, m mov. av.).8. -. -7.8 -.9.7.9 -.5 -... -.7. -.. Ex-Im (m cum., euro bn) -.5. -. -.7 -.9 -.9 -.9 -.7 -. -.8 -. -.8 -.7 -. -.5 Construction Confidence indicator - - - - -5-9 -9-5 -9-8 -5 - -5 - - -9 - -5 Economics and Market Analysis Austria May

- Data 7 8 9 I 9 II 9 III 9 IV 9 I 8/9 9/9 /9 /9 /9 / / / / 5/ Retail trade Confidence indicator 5.. -. -. -. -9. -8. -.8 -.9-7. -5. -.8 -.9 -.7 -.. -.9 5. Retail trade nom. (change against previous year in %)..9.5. -..7 -...9...... Retail trade nom. (change against previous year in %, mav.) -..7 -....8.7...9.5 Retail trade real (change against previous year in %)....5 -.7.9. 5.....7. -...7 Retail trade real (chg. against prev. month in %, s.a., mav.) -.7.9. 5......... Automobile trade nom. (change against prev. year in %)... -. -. -5.9. 5..5. -..8 7.5. Tourism Overnight stay (change against previous year in %).7.5.. -8.8..5 -.8..9 -.7 -.8 -. -. -. Labour market Employment*) (change against previous year in %).7.. -. -. -.5 -.9 -. -. -.9 -.8 -.7 -. -. -. -.5. Employment (s.a., change against previous month in %)........8 Unemployed (change against previous year in ) -.5 -.9 -. 8. 5. 55. 5..5 9.5 5.9 5..7. 5... -.8-8. Unemployment rate (in %, s.a.).8. 5.9 7..8 7. 7.5 7. 7. 7.5 7.5 7. 7. 7. 7. 7. 7..9 Prices CPI (change against previous year in %).5...5.........7..... HCPI (Change against previous year in %).7..... -..........9.8.8 Prices of raw materials (change against prev. year in %)..5. -. -8. -7. -8.. 58.5-5. -9.5..5 5. 58.7 58.7 58. 5.9 Crude oil (change against previous year in %)..7. -. -5.9-5. -.9. 75. -7. -..7 5. 8. 78. 77.7 9.5 8. Financial market M Euribor.......9.7.7.9.8.7.7.7.7.7.. -year government bonds.8...9...8..5.7.7.....5..5 USD per euro...5.....5...5.5.5.5.... Total loans (change against previous year in %, eop).7. 7. -. 5..5. -.....8. -. -. -.. Consumption loans (change against prev. year in %, eop)..7 5...5...... -....9.. *) excluding maternity/paternity leave, military service and training programmes Economics and Market Analysis Austria May

- 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 - - - 95 9 97 98 99 5 7 8 9 5 5-5 - -5 - - - - - 95 9 97 98 99 5 7 8 9 - - - - Austria's exports and imports Bank Austria Business Indicator Imports (yoy in %; m avg.) Exports (yoy in %; m avg.) - - - - - - 95 9 97 98 99 5 7 8 9 GDP (yoy in %, real) Bank Austria Business Indicator - - - - Economics - and Market Analysis - 98 99 5 7 8 9 Economics and Market Analysis Austria 7 May

- Graphs Unemployed Unemployed (yoy in,; right scale) Unemployment rate (in %; seasonally adjusted; left scale) 8 8 7 5 95 9 97 98 99 5 7 8 9 - - - Employment yoy in %, excl. matern./patern. leave, military serv. and training progr. - - - 95 9 97 98 99 5 7 8 9 - - - Inflation rate Retail trade HCPI (yoy in %) CPI (yoy in %) 5-95 9 97 98 99 5 7 8 9 5 - Retail trade (yoy in %; real; m avg.; left scale) Confidence indicator (right scale) 8 - - - -8 95 9 97 98 99 5 7 8 9 8 - - -8 - Economics and Market Analysis Austria 7 May

- Selected indicators Forecast 5 7 8 9 Change against prev. year in % GDP (real)..8.5.5.5.5. -... Industrial output (real) -.. 7.. 7...9 -... Gross fixed capital formation (real) -..7.7...8. -7.8 -.. CPI (yearly average).8....5...5.8. Unemployment rate (yearly average)...9 5..8..8.8 5. 5. General gov. balance (in % of GDP) -.7 -. -. -. -. -. -. -. -5. -. GDP (nom., Euro bn) 8.8..8. 5. 7.8 8.9 7.9 8.8 9.5 Per capita GDP (in euro) 7,78 7,5 8,9 9,,98,,8,,77,8 in EUR mn Merchandise exports 77, 78,9 89,88 9,75,7,8 7,5 98,,,5 Merchandise imports 77,5 8,99 9,9 9,99,,5 9,58,9 8,7,8 Current account balance **) 5,87,78 5,5 5,9 7,58 9, 9,, 7, 7,5 Current account balance (in % of GDP) **).7.7...8....5. Foreign direct investment (inflow, net) **) 7 5,89,5 8,7,,7 7,95 5,7,5,5 Gross foreign debt (end of period) **), 8,, 55,5 88,58 5,9 598,7 57,75 579,75 589,75 Gross foreign debt (in % of GDP) **) 5. 7. 87. 5.7 9.7.. 7...9 Import cover (in months) *) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. EUR (yearly average).......... EUR/USD (yearly average).95.....7.7.9.9.9 *) not useful for Austria as a member of the eurozone **) estimate for 9 Source: Bank Austria Economics and Market Analysis Austria, OeNB, Wifo, UniCredit Research Economics and Market Analysis Austria 7 May

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