Industrial Cash-flow Falling to Cyclical Low in 1992

  • Franz R. Hahn

The 1992 business cycle downturn led to a marked profit squeeze in Austrian manufacturing industry. The cash-flow ratio fell to 25.5 percent of value added, its lowest level since the mid eighties. The decline extended to all major sectors, concentrating on the manufacturing of basic goods. The key branch in this sector, the iron and steel industry suffered from persistent sluggishness of foreign demand and growing competition from Eastern European countries which requires streamlining of production and cost-cutting measures. Profit declines were less severe in sectors benefitting from the construction boom and from lively consumer demand. The turmoil in currency markets, international sluggishness of investment activity and remaining deficiencies in competitiveness were responsible for profit declines in the production of technical manufactures.