English, Article edition: Upturn in Manufacturing Dampened by Weakness of Domestic Demand. Economic Outlook for 1996 and 1997 Markus Marterbauer

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Upturn in Manufacturing Dampened by Weakness of Domestic Demand. Economic Outlook for 1996 and 1997
Author
  • Markus Marterbauer
Physical Description
  • article
Notes
  • Growth of real GDP is projected at ¾ percent annual average for 1996 and at 1 percent for 1997. Economic activity, while set to accelerate during 1997, may not yet rebound strongly enough as to follow up on the upswing interrupted around mid-1995. Domestic demand in particular is likely to remain lackluster, whereas merchandise exports should advance at a satisfactory pace. Overall output growth may still be too weak as to prevent a further deterioration of the labor market. In the second quarter 1996, real GDP rose by an estimated ½ percent year-on-year, following a ¼ percent advance in the previous period. The strongest demand components were private consumption, boosted by purchases carried forward in time in view of imminent tax hikes, and goods exports benefiting from favorable exchange rate movements and continued buoyancy in East-Central Europe. Yet, manufacturing output growth was outpaced by that of services, both personal and business-related. Strength of private consumption is unlikely to continue into the second half of 1996 and thereafter. The advance-sales boom early in the year will have a counterpart in a slump over the next quarters, when new cuts in public spending and tax increases will take effect. Household real disposable income is expected to fall by ½ percent in 1996 and by a further 1½ percent in 1997, leaving little scope for higher consumer spending even assuming a sizeable drop in the saving ratio. After a strong performance in the first semester 1996, domestic demand is set to slacken markedly, making for a likely further fall in output of some manufacturing branches (such as textile, apparel, leather, building materials, furniture and other consumer durables). Producers of intermediate goods and technical manufactures, however, should see a rebound in demand, mainly from abroad; cautious optimism for this sector is confirmed by results from the most recent WIFO business survey. Overall industrial output may rise by 2½ percent year-on-year in the second half, and the positive trend should extend into 1997. Construction output, having made up losses caused by the severe winter, is unlikely to advance further. Residential construction may maintain its high level, but commercial building and civil engineering are expected to recede further. Austria's exports of goods (1996 +4 percent in volume, 1997 +5½ percent) should benefit from strong demand from neighboring eastern countries as well as from stable exchange rates within the European Monetary System. The business trend is not pointing into the same direction for the major trading partners: while signs of a cyclical upturn have lately become apparent in Germany, activity seems to have levelled off in Italy and Switzerland. After another weak summer season, the situation in the tourism industry may stabilize gradually. The net surplus on foreign earnings is projected at 0.8 percent of GDP for 1996 and 1997, respectively, compared with a ratio of over 3½ percent in the early 1990s. The current account deficit may narrow to a figure corresponding to 1 percent of GDP. Sluggish overall activity provides little relief for the labor market. Employment (adjusted for people on military service and parental leave) is expected to decline in both 1996 and 1997 (by 16,000 and 7,000, respectively), leading to a further rise in registered unemployment to a total of over 245,000 on average 1997. The rate of unemployment will move up to 7.5 percent as traditionally calculated on national definitions (using only the dependent labor force as a base), or to 4.2 percent according to Eurostat. The rate of inflation should remain stable at an annual 1.7 percent over the projection period.
  • RePEc:wfo:monber:y:1996:i:10:p:623-624
  • Business activity in Austria in 1996 and 1997 is shaped by forces working in different directions. Growth of domestic demand is set to lose considerable momentum as private consumption may level-off from mid-1996 due to a squeeze in disposable income. Construction activity is unlikely to recover from its present slump. However, goods exports and output in export-oriented manufacturing sectors should pick up notably. Projected GDP growth of ¾ percent (1996) and 1 percent (1997) is likely to prove insufficient as to allow an improvement in labor market conditions.
  • Upturn in Manufacturing Dampened by Weakness of Domestic Demand. Economic Outlook for 1996 and 1997
  • RePEc:wfo:wquart:y:1996:i:4:p:171-176
Language
  • English
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