The Austrian Economy in 2006: Cyclical Upswing Gaining Momentum

The biggest contribution to the vigorous growth of the Austrian economy in 2006 was made by manufacturing. The total value added surpassed the previous year's level by 7.5 percent in real terms – the highest rate of increase in years. Industrial production mainly benefited from strong export demand. Exports of goods increased by 10.2 percent in real terms over the previous year's result, which primarily reflects the strength of economic growth in foreign markets, above all in the oil-exporting countries, Asia and North America, as well as the twelve new EU countries, but also in the rest of the European Union. Moreover, considering their prices and the quality of their products, domestic enterprises are highly competitive. The unit labour costs of the highly export-oriented Austrian manufacturers dropped by 2.3 percent against those of their trading partners in 2006. In the course of the year, the strong expansion of production resulted in a substantially higher utilisation of capacities (up from 81.3 percent in the fourth quarter of 2005 to 84.3 percent in the fourth quarter of 2006). Excellent earnings, favourable sales expectations, and the high utilisation of capacities encouraged many enterprises to step up their capital expenditure on plant and equipment by a considerable amount (+5.3 percent). Despite the extraordinary increase in hourly productivity (+6.9 percent), the goods-producing sector recruited new labour for the first time since 2001.