Revision of Price and Cost Competitiveness Indicators for Austria

The issue of short-term competitiveness, i.e., price and cost competitiveness has moved to centre stage in the economic policy debate fuelled by the economic crisis. Within the Eurosystem, the various indicators used to monitor short-term competitiveness are revised at regular intervals by the ECB and national compilers. In Austria, these indicators are compiled by the OeNB in cooperation with WIFO. The regular revisions are meant to ensure that the indicators adequately reflect changing country-specific trade patterns, remain useful measures and continue to be internationally comparable. In the revision undertaken in 2013, the basic conceptual framework was left unchanged in as much as the typical building blocks of the Austrian competitiveness indicator have been retained. At the same time, a number of adjustments were made: the previously fixed country weights were replaced by variable weights based on non-overlapping three-year periods, the underlying samples of trade partners and competing countries were adjusted, a services subindex was introduced to replace the existing travel and tourism subindex, and two new competitiveness indicators were added to enable cross-checks with the traditional consumer price-based measures. The two additions are, first, a new price competitiveness indicator for the manufacturing industry, based on relative producer prices, and second, a new cost competitiveness indicator for the Austrian economy and the domestic services industry, based on relative unit labour costs of the total economy. The revised set of indicators shows that Austria's price and cost competitiveness has improved continually over the past 15 years, with manufacturing exporters experiencing stronger gains in competitiveness than other areas of the economy. Services providers evidently have also become more competitive since the establishment of the EMU in 1999. Here, the improvement is found to be larger when we take into account changes in the consumer prices rather than total unit labour costs.