2012-04-25 03:48:20 - Fast Market Research recommends "Austria Commercial Banking Report Q2 2012" from Business Monitor International, now available
Below Potential But Steady Growth Ahead BMI View: Growth is set to remain at 2.0% in Austria in 2011 as less favourable base effects are balanced by improving trade and investment dynamics. In particular, Austria's strong trade integration with Germany will keep export data well supported this year. In turn, this should help to underpin a broader recovery in the economy over the coming quarters. According to the most recent data compiled by eurostat, Austria's economic recovery continued to gather pace in the first quarter of 2011, growing by 1.0% in quarter-on-quarter (q-o-q) terms on a seasonally adjusted basis (4.0% y-o-y) compared to 0.9% q-o-q growth in the last quarter of 2010 (3.2% y-o-y - the fastest rate of annual
growth since Q207). The outlook for Austria's economic growth trajectory remains broadly positive, and having expanded by 2.0% in 2010, we expect the same growth in 2011 on the back of strong export and investment data. This marks a robust recovery following the 3.4% contraction witnessed back in 2009. While favourable base effects will begin to wear off this year, we also note that household spending should begin to display a more marked pick-up as consumer confidence and unemployment continue to improve. We also hold to our forecast for growth to hold steady at 1.9% per annum through to 2015, although admittedly this falls below the country's average pre-crisis growth rate of 2.9% between 2004 and 2008. Exports & Investment Continue To Drive Growth According to a breakdown of the data, the net export and investment components of GDP by expenditure continued to drive real GDP growth while government expenditure proved a small drag on headline growth. Indeed, while imports increased 2.4% q-o-q (12.1% y-o-y) in the first quarter of 2011, exports grew at a healthier clip of 3.4% q-o-q (13.4% y-o-y). This outperformance of exports over imports is a trend that has been evident since Austria's economic recovery first took hold at the start of 2010 and is one that we expect to continue (albeit to a lesser extent). While a full breakdown of trade data is unavailable at this juncture, we note that this view is driven by Austria's strong trade integration with Germany. Indeed, we have revised up Germany's growth in 2011 after an impressive outturn in the first quarter of the year and with the economy still firing on all cylinders this should keep demand for Austrian exports well supported (see our online service, May 13, 'Impressive Recovery To Maintain Momentum). We forecast real export growth of 4.0% compared to 1.0% for imports this year, which will see net exports contribute 1.3 percentage points (pp) to headline growth. Investment also came in strong in the first quarter of the year, with gross fixed capital formation (GFCF) increasing by 0.9% q-o-q (4.1% y-o-y). As we stated in our previous quarterly roundup, firming external demand should continue to increase capacity utilisation within the domestic economy as well as improve confidence in the sustainability of the recovery (see our online service, March 1, 'Investment And Exports To Drive Growth In turn, this should bode well for investment further down the line. That said, we note that over the longer term, Austria's ability to attract foreign investment into Austria at the same clip witnessed prior to the global financial crisis will prove an increasingly difficult task for the government. Indeed, as we noted last quarter, while Vienna still stands as a key financial and transit hub within the region (primarily as a result of its geographical proximity to emerging European markets) the fact that countries east of Austria are set to follow slower growth trajectories over the next few years (compared to pre-global financial crisis) and given that cities such as Prague and Budapest could potentially offer cheaper alternatives to Vienna, this status will likely come to be challenged in the future. (see our online service, March 1, 'Stability For Now, But Risks Mounting Austria Commercial Banking Report Q1 2012 © Business Monitor International Ltd Page 33 Household Spending Will Be Stronger In 2012 While eurostat has not yet published data for household spending in Q111, we note that consumption within the economy has not yet proven that important to the economic recovery. This is at least partly the result of declining government consumption on the back of the state's austerity drive. Indeed, government expenditure declined 0.2% y-o-y in the first of quarter of this year and given the government's ongoing efforts to bring the deficit below 3.0% of GDP by 2012, is likely to remain weak over the coming quarters. However, with consumer confidence expected to pick up and unemployment forecast to continue edging lower owing to increased activity in export-oriented industries, household spending should continue to firm going forward.
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