English, Article edition: Rising Industrial Output, but Overall Employment Stagnating Markus Marterbauer

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  • article
Language
  • English

Edition details

Title
  • Rising Industrial Output, but Overall Employment Stagnating
Author
  • Markus Marterbauer
Physical Description
  • article
Notes
  • Industrial production reaccelerated markedly in late spring, but a weaker flow in new orders suggests the rebound may be short-lived. The quasi-stagnation in overall employment may complicate economic policy efforts to improve the fiscal balance. Recent business cycle developments are characterized by the upward momentum of industrial output. The latter rose 7 percent year-on-year in the first five months of 1995. On a seasonally adjusted basis, it rebounded strongly in April and May from a weaker first quarter. Demand has shifted from re-stocking of basic goods and semi-manufactures towards machinery and other investment goods. This is confirmed by positive results from the latest WIFO investment survey. However, leading indicators point to a slower pace of output growth during the coming months. New orders, both domestic and from abroad, have fallen recently, and the stock of unfinished orders has come down to just slightly above the year-earlier level. This mirrors a flatter profile of the recovery in Western Europe. In countries whose currency has recently been devalued exports provide a major stimulus, but a generally restrictive policy stance weakens its spilling over to domestic demand. In the hard-currency countries, export competitiveness is severely strained by the recent exchange rate shifts. Massive tax increases in Germany at the beginning of the year, in particular the re-introduced "solidarity" surcharge on direct taxes, constitute an additional burden on domestic private consumption. Industrial output strength has not been accompanied by new jobs, but by substantial productivity gains while employment remains at the year-earlier level. In other sectors too, hardly any new jobs are on balance being created. Demand for new construction is slackening, except for residential buildings where output keeps rising strongly. The tourism business is hit by a severe crisis: in the first half of 1995, the number of visitors fell 3 ½ percent from last year's total. This negatively affects retail trade which is also suffering from a shopping-abroad-spree of Austrians, following accession to the EU and the devaluation of the Italian lira. Employment possibilities in the public sector are constrained by efforts to cut personnel costs. Thus, untypically, overall employment has leveled off at a rather early stage of cyclical recovery, with unemployment remaining at a rate slightly above 4 ½ percent. The current account weakened from equilibrium in the first five months 1994 to a deficit of Sch 13 billion for the same period 1995. Net receipts from foreign travel fell by Sch 5 ½ billion to a total Sch 22 ½ billion, mainly due to higher spending by Austrians abroad. The net outflow on current transfers was boosted by first-time contributions to the EU funds. Consumer price inflation accelerated from an annual rate of 2.4 percent in May 1995 to 2.6 percent in June. Higher gasoline prices accounted for most of recent rises in the index, due to mineral oil tax hikes, but lower spot-market prices and a weaker dollar may now work in the opposite direction. Housing costs are also a major inflation-boosting component, reflecting both higher communal charges and the effect of a persistent housing shortage on rents. Food prices remain generally falling following Austria's accession to the EU, and the impact of stronger competition is increasingly felt also in other "sheltered" areas. The inflation rate of 2.6 percent in June is 0.2 percentage points above the rate in Germany; vis-à-vis other hard currency countries the differential is wider (Netherlands +0.5, Belgium +1.3 percentage points). In Western Europe, the general trend is still towards decelerating inflation, although a revival of inflationary pressure is discernible in the weaker currency countries, particularly in Italy (+5.8 percent annual rate in June).
  • Rising Industrial Output, but Overall Employment Stagnating
  • RePEc:wfo:monber:y:1995:i:8:p:512-519
Language
  • English
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