Upswing in Domestic Economy Continues

The recovery of the Austrian economy is continuing. Looking at weekly activity, the momentum has weakened recently, but economic activity has already returned to pre-crisis levels (average for 2019). The weekly activity indicators point to a year-on-year increase in economic output of around 6.7 percent for July. According to the July WIFO-Konjunkturtest (business cycle survey), domestic companies were again more optimistic about the current situation than in the previous month, but their expectations have recently dimmed slightly.

The lifting of regulatory restrictions in many sectors in the course of the second quarter resulted in a significant acceleration of the economic recovery. On the supply side, this mainly affected consumer-related services (trade, catering, accommodation, body-related services). The favourable industrial and construction activity continued. The recovery of the Austrian economy thus persisted. Looking at weekly economic activity, the momentum recently showed a slowdown, but economic activity already returned to pre-crisis levels (average in 2019 as a fixed reference period). GDP in July was 6.7 percent higher than a year earlier.

Leading indicators point to a persistent upswing phase. The results of the WIFO-Konjunkturtest (business cycle survey) of July again show an improvement in the assessment of the situation, although corporate expectations have recently deteriorated slightly. The fact that economic assessments did not improve as significantly as in previous months is likely to be primarily due to the already high level of indicators. Growth momentum should therefore soon reach the ceiling.

Clear inflationary tendencies are still evident. In Austria, the harmonised inflation rate was 2.8 percent in June, once again significantly higher than in the euro area (+1.9 percent). Although energy prices continue to make a significant contribution to inflation, their increase is attributable to the particularly low price level of the previous year and thus to a base effect. Prices in restaurants and hotels have also risen significantly recently, while those of food and non-alcoholic beverages have hardly changed at all.

The recovery on the labour market continued. According to preliminary estimates, the number of employed persons was again slightly higher in July than in the previous month, while unemployment stagnated (+0.1 percent compared with June). The seasonally adjusted unemployment rate (national definition) is estimated to have been 7.7 percent in July.