The Austrian economy continues to recover, yet as we move into autumn there are still no signs of a noticeable upturn in economic activity.
Austrian consumers are still disproportionately pessimistic by European standards. Nevertheless, the sentiment among Austrian consumers in August improved slightly, despite the still tense situation on the labour market. According to calculations from the Bank Austria Business Indicator, the improvement in consumer mood managed to compensate for the somewhat more pessimistic assessment of business prospects in the industry. Following the leisurely improvement of previous months, the economic concerns surrounding certain emerging markets have to some extent put a damper on the sentiment in the European industry. In Austria, the negative signals were reflected more strongly in a decline of industrial confidence.
While the demand for Austrian export products will increase somewhat in the coming months, boosted by the ongoing recovery in Europe, the weaker emerging markets will provide less support to the Austrian economy for its growth than was previously assumed. Consequently, investment activity will be barely able to pick up pace towards the end of the year, in spite of the persistently low interest rates. By contrast, consumption will likely be able to expand its role as a reliable pillar of economic growth in the coming months. The low inflation, which will amount to no more than an annual average of 1.2% in 2015, is boosting the purchasing power of Austrian consumers.
With investment activity continuing its dogged progress, the recovery is expected to persist with a modest upwards trend. “For 2015 as a whole, we uphold our growth projection of 0.9 % for the Austrian economy”, says UniCredit Bank Austria’s Chief Economist Stefan Bruckbauer.
Thanks to the income tax reform, consumption will become an even more important driver of growth in the Austrian economy in 2016. The tax reform is expected to have a positive impact on the economy overall amounting to 0.4 percentage points. With the European recovery becoming increasingly stable, the stronger consumption should lead to an expansion of investments, but the relatively low utilisation rate of the Austrian economy means this will be quite modest. UniCredit Bank Austria’s economists project economic growth in Austria will total 1.5% in 2016, assuming that there will be more support from abroad and more buoyant domestic demand based on increased investment and consumption.
Contact:
Tina Fischer
Senior Relationship Manager
Global Securities Services Austria
tina.fischer@unicreditgroup.at