The dampening impact of the international cyclical slowdown on Austrian exports and business investment is being exacerbated
by a decline in construction activity: in April and May, the sector's gross output fell by an inflation-adjusted 8 percent
below the year-earlier level. Domestic manufacturing output held up well against the international cyclical slowdown until
spring, but has since shown clear signs of weakening. In the second quarter, the production index was no higher than a year
ago, having gained 6 percent during the first three months of the year. Exports and investment have also lost much of their
previous momentum. Still more critical than in manufacturing, however, is the situation in the construction sector. In April
and May, nominal output fell by 6½ percent year-on-year, or by 8 percent at constant prices. Particularly severe was the slump
in residential construction (–14½ percent); gross output also fell in civil engineering. The sharp downturn is confirmed by
the labour market statistics: 14,000 construction jobs were lost from the previous year in the second quarter, and unemployment
edged up by 3,000. Leading business climate indicators do not yet support hopes for an imminent turnaround. Industrial confidence
has weakened further in the third quarter. Results from the regular WIFO business survey have pointed down for the fifth time
in a row. Sentiment in the construction sector has taken a steep fall. Exports remained surprisingly strong from January to
April, gaining 10 percent year-on-year. In May, however, they failed to reach the year-earlier level, a reversal that is broadly
in line with the slowdown abroad and firms' more pessimistic judgement on export orders. Tourism is currently providing major
support to overall activity. The summer season has taken an encouraging start, with gross revenues from May to July rising
by 5.2 percent from last year. Higher net earnings from cross-border tourism services are also largely responsible for an
improvement in the current account. Consumer demand was still lively in the first quarter, but abated in the following period.
Volume retail sales decelerated, while new car registrations declined. Wholesale trade was moreover affected by the slackening
of exports and investment. Labour statistics for the trade sector, on the other hand, showing a net increase in the number
of jobs and unemployment falling until mid-year, suggest a somewhat better situation. Labour market conditions overall are
reflecting the cyclical slowdown. The year-on-year gains in employment (excluding people on parental leave and in military
service) have narrowed to 0.4 percent by August, the number of unemployed is up by 15,300. The seasonally adjusted rate of
unemployment (as calculated by the labour market service) has moved up to 6 percent.
Keywords:Business Cycle Report, Austria; Lower Construction Output Adding to Cyclical Downturn
Forschungsbereich:Makroökonomie und öffentliche Finanzen
Sprache:Englisch