Economy records its fastest upturn in over two years in Q3

GDP returns to growth in sequential terms: According to a preliminary reading, the Austrian economy ramped up in the third quarter, expanding 0.3% on a seasonally adjusted quarter-on-quarter basis after stagnating in the second quarter. The reading marked the strongest result since Q2 2022, though it fell short of the Euro area average of 0.4%. On an annual basis, the downturn in economic activity slowed to a crawl, with GDP falling 0.1% in Q3 (Q2: -1.2% yoy).

Broad-based recovery takes hold: Domestically, the quarterly upturn was broad-based and spearheaded by a sharp rebound in private spending, which rose at a near two-year high sequential clip of 0.5% in Q3 (Q2: -0.6% s.a. qoq); lower inflation and laxer financial conditions likely supported household budgets. Moreover, public consumption returned to growth, rising 0.5% in Q3 (Q2: -0.2% s.a. qoq). In addition, fixed investment dropped at a milder rate of 0.3% in Q3, following the 0.7% decrease logged in the previous quarter. On the external front, exports of goods and services growth hit an over two-year high of 1.2% in the third quarter (Q2: -1.0% s.a. qoq). In addition, imports of goods and services rebounded, growing 1.7% in Q3 (Q2: -0.5% s.a. qoq). On an annual basis, economic activity contracted 0.1% in Q3, an improvement from the previous quarter's 1.2% contraction and marking the best result since Q1 2023.

Growth to accelerate but remain muted: Despite Q3’s upturn and an expected further uptick in Q4, the economy is forecast to remain in the doldrums in 2024 as a whole. Moreover, our panel expects growth to remain below its pre-pandemic 10-year average in 2025 due to spillovers from persistent weakness in the German manufacturing sector.

Panelist insight: ING’s Franziska Biehl commented: “Looking ahead, there is little to suggest an imminent trend reversal for the Austrian economy. With the US economy gradually losing steam and the eurozone's economic recovery slowing, both Austrian industry and trade are likely to remain under pressure. However, sentiment has not only been muted in industry lately, but also among consumers. Political uncertainty at home, resulting from the ongoing process of forming a new government, geopolitical risks and the fear of a weakening labour market do not provide a fertile breeding ground for major spending.”

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