Robust Domestic Demand Supports the Economic Activity in Austria

WIFO Business Cycle Report June 2019
Following a slowdown in the global economic momentum over the previous year, world GDP expanded moderately in the first quarter of 2019. In line with this, domestic export growth weakened slightly. The domestic demand is supporting the Austrian economic activity. GDP in Austria rose by 0.4 percent in the first quarter of 2019 compared with the previous quarter.

In the first quarter of 2019, the global economy is likely to have expanded only moderately, whereas development varied greatly from region to region. Real gross domestic product grew in the euro area and in the USA, while the economy continued to weaken in some emerging economies. Growth in domestic exports has recently been slightly subdued. In contrast, domestic demand again proved to be a stable pillar of growth for the Austrian economy in the first quarter. Private consumption expenditure growth continued to strengthen, and the high momentum of construction investments continued.

The leading indicators paint a mixed picture for Austria. According to the WIFO-Konjunkturtest (WIFO business cycle survey) in May, despite the slowdown since the economic peak at the end of 2017 and beginning of 2018, companies are still confident. In terms of consumer confidence, the positive and pessimistic assessments are balanced in the latest evaluation. The UniCredit Bank Austria Purchasing Managers' Index and uncertainty indicators, among others, reflect a noticeably more pessimistic outlook.

The economic slowdown is now beginning to have an impact on the labour market, although the situation is still favourable. According to preliminary estimates, the number of persons in active dependent employment continued to rise in May (+74,000 year-on-year). In terms of unemployment, on the other hand, the recovery is coming to an end, with the seasonally adjusted unemployment rate (according to the national definition) stagnating.

The inflation rate of 1.7 percent (CPI and HICP) in April 2019 was in line with the euro area average. Inflation in Austria remains moderate and even declined somewhat in April compared to the previous month. The most important price drivers again were spending on housing, water and energy as well as on restaurants and hotels.