Austria: Economy contracts in the second quarter
A second national accounts release revealed that the economy shifted into reverse in the second quarter, contracting 0.4% on a seasonally adjusted quarter-on-quarter basis. The reading fell short of a preliminary estimate of flat growth and came in below both Q1’s 0.1% expansion and the Euro area 0.3% average. On an annual basis, economic activity shrank 0.6%, improving from the 1.3% contraction logged in the prior quarter and marking the best result since Q1 2023.
Domestically, the quarterly result was chiefly a result of weaker private consumption, which swung into a 1.1% contraction in the second quarter from the first quarter’s 0.8% expansion. Downbeat consumer sentiment and a higher unemployment rate likely weighed on household budgets. More positively, public spending growth accelerated to 1.3% in Q2 (Q1: 1.0% s.a. qoq). Moreover, fixed investment rebounded, growing 1.7% in Q2, contrasting the 2.7% decrease recorded in the prior quarter.
On the external front, exports of goods and services contracted flatlined in Q2 (Q1: -1.2% s.a. qoq), marking the best result in five quarters. Meanwhile, imports of goods and services grew 0.6% in Q2 (Q1: -1.4% s.a. qoq.
Our panelists expect the economy to return to growth on a sequential basis in the third quarter and pencil in faster momentum for the second half of the year compared to H1. Overall in 2024, the economy is set to post a shallow rebound as recovering private spending and exports outweigh the negative impact of tight financing conditions and a poor performance in the German industrial sector.
Analysts at the EIU commented:
“Although we do not expect the economy to return to recession, there is little reason for much optimism in 2024, as the main drivers of growth are all likely to remain depressed. A poor industrial performance in Germany will affect Austria’s manufacturing exports (as the two countries’ industrial sectors are closely integrated).”
Unicredit’s Walter Pudschedl added:
“There are no immediate signs of a revival, and the hoped-for recovery is at least postponed until late autumn. After the decline in GDP in the first half of the year by around half a percent compared to the previous year, no more than stagnation is expected for 2024 as a whole. We have lowered our GDP forecast from 0.3 to 0.0 percent.”