Monetary Policy and the Economy Q2-Q3/23
Nontechnical summaries in English
How have profits been shaping domestic price pressures in Austria?
Friedrich Fritzer, Doris Prammer, Lukas Reiss, Martin Schneider
There is an ongoing public debate on the factors that have been driving domestic price pressures in Austria and in the euro area. A recurrent theme is whether the sharp increases in inflation may have been fueled by an excessive rise in corporate profits in some sectors. We address this question by decomposing sectoral value added deflators into their income components.
These deflators record the price development of domestic value added without imported intermediate inputs. Value added is composed of compensation of employees, net taxes on production (= other indirect taxes on production less other subsidies), depreciation and profits (net operating surpluses). By decomposing value added, we can infer the contribution to price developments for each of these components.
In 2022, the deflator for the overall economy (except for the real estate sector, the information and communication sector and the public sector, which we excluded due to data issues) rose by 6.4%, more than half of which (4.0 percentage points) was attributable to increased profits. In order to examine whether the contribution from profits was driven by an above- or below-average development of profits, we split the profit contribution into two components: a distribution-neutral profit contribution, assuming that all income components grow at the same rate, which means that the respective shares (wage and profit share) remain constant; and a nonneutral profit contribution, which is characterized by a below- or above-average rise in profits in relation to the other income components. In 2022, the nonneutral profit contribution accounts for more than a third (2.5 percentage points) of the deflator increase; thus, corporate profits were a relevant price driver.
From a sectoral perspective, three sectors exhibited pronounced above-average contributions from profit. These sectors were energy (including mining as well as water supply and sewerage services), construction, and agriculture (including forestry). At the same time, profit development in the manufacturing sector was below average. Thus, inflation driven by energy prices contributed to a reallocation within the business sector in 2022.
In the first quarter of 2023, the increase of the value-added deflator for the overall economy (excluding the above-mentioned sectors) accelerated to 10.7%, well beyond the figure for 2022 as a whole (6.4%). In addition to the afore-mentioned sectors (energy, including mining; water supply and wastewater services; and construction and agriculture, including forestry), financial and insurance services showed a strong profit-driven deflator increase by 23%.
In its latest forecast, the OeNB expected profits to come under pressure in the remainder of 2023 and in 2024 due to slow economic growth, sharply increasing unit labor costs and mounting replacement costs for capital driving depreciation and amortization; for 2024, the OeNB forecast even points to a dampening effect on inflation.
From a distribution-neutrality perspective, we find the contribution from corporate profits to the value-added deflator to be slightly above average in the period from 2020 to 2024.
Energy price shock poses additional challenge to Austria’s price competitiveness
Thomas Url, Klaus Vondra, Ursula Glauninger
How competitive are Austrian goods and service exports? The first step toward answering this question is to compare the value of the Austrian currency against a basket of other currencies in a way that reflects the relative importance of trading partners. This is what the so-called nominal effective exchange rate index does. For Austria, this index is being provided by the Oesterreichische Nationalbank (OeNB) and the Austrian Institute of Economic Research (WIFO). When this index goes up, Austrian exports become more expensive in other countries. When this index goes down, Austrian exports become less expensive. By adding information on the relative development of prices or costs, i.e. by comparing the prices or the costs of production in Austria with each trading partner, we arrive at the real effective exchange rate index. Austria’s real effective exchange rate index is, thus, an indicator of Austria’s international price or cost competitiveness. With this article, we publish the latest update of weights used to compute the nominal and real exchange rate index for Austria in four segments of the economy: (1) manufactured goods, (2) food and beverages, (3) raw materials and energy products, (4) services and (4a) tourism services. Our calculations relate to up to 55 trading partners, which account for more than 95% of all exports from and imports to Austria. The key consequence of updating the effective exchange rate is the reweighting of the individual currencies to reflect ongoing changes in the relative importance of the individual trading partners. In this article, we update the calculations published in 2021 by reflecting more recent data from 2016 to 2018 on trade flows in the weighting matrix.
The index recalculation and the extension of the calculations until mid-2023 show that in nominal terms the Austrian economy has lost some competitiveness over time, but in real terms (deflated by the (harmonized) index of consumer prices) the situation is almost unchanged compared to 1999. After the COVID-19 crisis, the Austrian economy exhibited a clear improvement in its competitiveness position, owing to a nominal devaluation and lower inflation rates compared to its trading partners. However, both driving factors have since turned around, resulting in a V-shaped development of the effective exchange rates and clear losses in both nominal and real terms since fall 2022. Current forecasts show that the inflation differential to the euro area will shrink while unit labor costs will be driven due to comparatively higher wage agreements in Austria. Hence, Austria will exhibit further competitiveness losses. The authors expect these losses to have a dampening effect on the Austrian economy of around 1 percent between 2022 and 2025.
Nontechnical summaries in German
Die Rolle der Gewinne für die Entwicklung des binnenwirtschaftlichen Preisdrucks in Österreich
Friedrich Fritzer, Doris Prammer, Lukas Reiss, Martin Schneider
Seit einiger Zeit gibt es sowohl in Österreich wie auch im Euroraum eine öffentliche Diskussion über die Ursachen des binnenwirtschaftlichen Preisdrucks. Konkret geht es um die Frage, ob es in manchen Sektoren im Zuge der hohen Teuerung zu einem übermäßigen Anstieg der Unternehmensprofite kam. Wir beantworten diese Frage mit einer Zerlegung von sektoralen Wertschöpfungsdeflatoren: Diese erfassen die Preisentwicklung der inländischen Wertschöpfung ohne importierte Vorleistungen. Die Wertschöpfung setzt sich zusammen aus Arbeitnehmerentgelten, Nettoproduktionsabgaben (= sonstige indirekte Produktionsabgaben abzüglich sonstiger Subventionen), Abschreibungen und Gewinnen (Nettobetriebsüberschüssen). Durch die Zerlegung kann man jeder dieser Komponenten ihren Beitrag zur Preisentwicklung zuordnen.
Für das Jahr 2022 stieg der Deflator für die Gesamtwirtschaft (die Immobilienwirtschaft, Information und Kommunikation sowie der öffentliche Sektor wurden aus Datengründen exkludiert) um 6,4 %. Mehr als die Hälfte davon (4,0 %-Punkte) wurde durch Gewinnanstiege erklärt. Um zu klären, ob dieser Beitrag durch eine über- oder unterdurchschnittliche Gewinnentwicklung getrieben wird, zerlegen wir den Gewinnbeitrag in zwei Komponenten: einen verteilungsneutralen Gewinnbeitrag, bei dem alle Einkommenskomponenten annahmegemäß gleich stark wachsen, und daher die jeweiligen Quoten (Lohn- bzw. Gewinnquote) konstant bleiben; und in einen nicht-neutralen Gewinnbeitrag, der durch ein im Verhältnis zu den anderen Einkommenskomponenten unter- oder überdurchschnittliches Wachstum der Gewinne bestimmt wird. Im Jahr 2022 erklärt der nicht-neutrale Gewinnbeitrag mehr als ein Drittel (2,5 %-Punkte) des Deflatoranstiegs; damit waren Unternehmensgewinne ein relevanter Preistreiber.
Auf sektoraler Ebene waren im Jahr 2022 in den drei Sektoren Energie (inkl. Bergbau sowie Wasser und Abwasser), Bau sowie Land- und Forstwirtschaft überdurchschnittliche Gewinnbeiträge zu verzeichnen. Gleichzeitig war die Gewinnentwicklung in den Unternehmen der Sachgütererzeugung unterdurchschnittlich. Die energiepreisgetriebene Inflation 2022 trug damit zu einer Umverteilung innerhalb des Unternehmenssektors bei.
Im ersten Quartal 2023 beschleunigte sich der Anstieg des Wertschöpfungsdeflators für die Gesamtwirtschaft (ohne die von uns exkludierten Sektoren) und lag mit +10,7 % deutlich über dem Gesamtjahr 2022 (+6,6 %). Neben den Bereichen Energie (inkl. Bergbau sowie Wasser und Abwasser) sowie Bau und Landwirtschaft war bei den Finanz- und Versicherungsdienstleistungen ein starker gewinngetriebener Deflatoranstieg in der Höhe von +23 % zu verzeichnen.
Für den Rest des Jahres 2023 und im Jahr 2024 werden die Gewinne laut der aktuellen OeNB-Prognose durch das niedrige Wirtschaftswachstum, stark steigende Lohnstückkosten und steigende Wiederbeschaffungskosten für die Abschreibung des Kapitalstocks unter Druck kommen; im Jahr 2024 werden sie sogar inflationsdämpfend wirken.
Im gesamten Zeitraum 2020 bis 2024 tragen Gewinne – im Sinne der Verteilungsneutralität – geringfügig überdurchschnittliche zum Wachstum des Wertschöpfungsdeflators bei.
Energiepreisschock bedroht preisliche Wettbewerbsfähigkeit Österreichs
Thomas Url, Klaus Vondra, Ursula Glauninger
Der nominelle effektive Wechselkursindex ist ein handelsgewichteter Durchschnitt der bilateralen Wechselkurse eines Landes mit den wichtigsten Handelspartnern. Ein höherer Indexwert signalisiert aus makroökonomischer Sicht eine Aufwertung gegenüber den Handelspartnern, ein sinkender eine Abwertung. Durch die Integration der relativen Preis- oder Kostenbewegungen in den nominellen Wechselkursindex erhält man einen real effektiven Wechselkursindex. Dieser ist ein Indikator für die internationale Preis- oder Kostenwettbewerbsfähigkeit eines Landes, je nachdem ob Preis- oder Lohnkostenindizes verglichen werden. Im vorliegenden Beitrag aktualisieren die Oesterreichische Nationalbank (OeNB) und das Österreichische Institut für Wirtschaftsforschung (WIFO) den nominellen und realen Wechselkursindex für Österreich für vier Branchen: (1) Industriewaren, (2) Nahrungsmittel und Getränke, (3) Rohstoffe und Energieprodukte, (4) Dienstleistungen und (4a) den Tourismus. In den Berechnungen werden bis zu 55 Handelspartner und damit mehr als 95 % des österreichischen Handels berücksichtigt. Die entscheidende Komponente in der Berechnung der Wechselkurse ist die Gewichtsmatrix, in der das Gewicht der einzelnen Handelspartner festgelegt wird. Im vorliegenden Artikel wurde diese Gewichtsmatrix mit nun zur Verfügung stehenden Daten für die Jahre 2016 bis 2018 neu berechnet und somit die Ergebnisse der letzten OeNB/WIFO- Berechnungen aus dem Jahr 2021 aktualisiert.
Die neuen Gewichte und die Verlängerung der Berechnungen bis Mitte 2023 zeigen, dass die österreichische Wirtschaft im Laufe der Zeit nominell etwas an Wettbewerbsfähigkeit verloren hat, während die reale Position (deflationiert mit dem HVPI/VPI) gegenüber 1999 nahezu unverändert blieb. Nach der COVID-19-Pandemie kam es zunächst zu einer nominellen Abwertung; im Vergleich zu den Handelspartnern niedrigere Inflationsraten in Österreich ließen den Effekt real noch stärker ausfallen. Allerdings haben sich beide treibenden Faktoren in der jüngeren Vergangenheit umgekehrt. Dies zeigt sich in einem V-förmigen Verlauf der effektiven Wechselkursindizes seit Herbst 2022, beide haben in diesem Zeitraum deutlich aufgewertet. Aktuelle Prognosen zeigen, dass sich der Inflationsunterschied zum Euroraum zwar verringern wird. Da die Lohnabschlüsse in Österreich aber vergleichsweise höher sein werden, sollten die Lohnstückkosten in Österreich stärker steigen als im Euroraum; mit entsprechend negativen Auswirkungen auf die preisliche Wettbewerbsfähigkeit. Die Autoren rechnen damit, dass dieser Verlust zwischen 2022 und 2025 die Wirtschaftsentwicklung in Österreich im Ausmaß von rund einem Prozent dämpfen wird.
Höhere Inflation trägt in der Regel zu einem höheren Wachstum der Staatseinnahmen bei, doch der Gesamteffekt der Teuerung auf den Staatshaushalt ist nicht eindeutig. Um festzustellen, wie sich der aktuelle Inflationsschock auf Österreichs Staatsfinanzen auswirkt, berücksichtigen wir in unserer Analyse insbesondere seine spezielle Ausprägung: der aktuelle Preisanstieg ist primär das Resultat des starken Anstiegs der internationalen Energiepreise und hat damit einen negativen Effekt auf das reale BIP. Unter diesen Voraussetzungen kommen wir zu dem Schluss, dass die Auswirkungen der hohen Inflation auf die öffentlichen Finanzen insgesamt eindeutig negativ sind, auch wenn sich kurzfristig ein kleiner positiver Effekt ergibt. Der kurzfristig positive Effekt auf den Staatshaushalt fällt allerdings viel kleiner aus als das Volumen der bereits verabschiedeten staatlichen Unterstützungen zur Abfederung der negativen Auswirkungen der Inflation auf Haushaltseinkommen und Unternehmen. Auch die Staatsschuldenquote geht kurzfristig zurück. Die laufende Verschlechterung des Budgetdefizits infolge der hohen Inflation lässt die Schuldenquote ab 2026 aber ansteigen. Darüber hinaus vergrößert die kürzlich in Österreich eingeführte Abschaffung der kalten Progression und die Indexierung der Familienleistungen die negativen Effekte des aktuellen Inflationsschocks auf den Budgetsaldo.
Austria’s economy set to recover after period of stagflation
Economic outlook for Austria from 2023 to 2025 (June 2023)
Friedrich Fritzer, Mathias Moser, Christian Ragacs, Lukas Reiss, Alfred Stiglbauer and Klaus Vondra 1
Cutoff date: May 31, 2023
Austria’s economic recovery following the COVID-19 pandemic came to a complete halt in the second half of 2022. Since then, we have seen a period of stagflation triggered by uncertainties related to Russia’s war against Ukraine, the weaker momentum in the international economic environment and the sharp rise in inflation triggered by soaring energy prices. This means that stagnating economic growth has been accompanied by high inflation rates. Unlike in Germany, however, there is currently no risk of a recession in Austria for 2023 as a whole.
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % (real) | ||||
|
Gross domestic product
(GDP) |
4.9 | 0.5 | 1.7 | 1.6 |
|
Harmonised Index of
Consumer Prices (HICP) |
8.6 | 7.4 | 4.1 | 2.9 |
|
Unemployment rate
(national definition) |
6.3 | 6.4 | 6.2 | 6.1 |
| % of nominal GDP | ||||
| Current account balance | 0.7 | 1.3 | 1.9 | 2.3 |
| Budget balance | –3.2 | –2.6 | –1.9 | –1.9 |
| Government debt | 78.4 | 75.2 | 72.7 | 70.9 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
In the course of 2023, global economic activity will be recovering slowly, but domestic inflationary pressures will remain high. We do not expect notable real GDP growth in Austria before the second half of 2023. For 2023 as a whole, Austria’s economy is set to grow by a weak 0.5%. Inflationary pressures will weaken in 2024, and domestic activity will become the main economic driver. Given the particularities of the wage-setting process in Austria, there is an inherent lag in wage compensation for inflation. This, in turn, leads to a sharp rise in real wages and thus in private consumption. Consequently, economic growth will accelerate to 1.7%. Economic growth in Austria (1.6%) will continue to be driven by strong consumption in 2025 as well. The Austrian labor market continues to be characterized by persistent labor shortages. Therefore, despite the weak economic situation, we do not expect any significant effects on the unemployment rate in 2023 (6.4%). In 2024 and 2025, we expect the unemployment rate to decline again. Inflation as measured by the Harmonized Index of Consumer Prices (HICP) peaked at 8.6% in 2022, driven by energy prices. Inflation will ease between 2023 and 2025 but will still remain well above its long-term average in 2025 (2.9%). Despite stagflation, Austria’s budget balance will decline to –2.6% of GDP in 2023, reflecting the phasing-out of temporary fiscal measures (and COVID-19-related measures in particular). The expected further improvement of the budget balance to –1.9% of GDP in 2024 can be attributed to the rebound in economic activity and the phasing-out of Austria’s energy relief packages. The debt-to-GDP ratio will fall from 78.4% in 2022 to 70.9% in 2025, mainly because of high growth in nominal GDP due to inflation.
1 Export growth loses considerable momentum and remains below average
Global monetary policy tightening to contain inflation, the uncertainty stemming from the continuing war in Ukraine and increasing geo-economic fragmentation are reflected in the weak growth of both the global economy and global trade flows. Growth dynamics will be slowing down significantly in 2023 in almost all advanced economies around the world; in the United States, for instance, economic growth will halve from 2.1% in 2022 to 1% in 2023. By contrast, China’s growth rate will double in 2023, coming to 6% year on year, following the relaxation of the country’s strict COVID-19-related measures. However, this high annual figure masks the fact that, following a strong first quarter, the pace of economic activity in China will weaken significantly in the coming quarters. Overall, at 3.1%, the global economy excluding the euro area will grow somewhat more slowly in 2023 than in 2022 (3.3%) and will not gain much momentum in the years ahead, either. In the euro area, economic activity is also set to lose considerable momentum in 2023 (0.9%). After that, however, and despite rising interest rates, euro area growth will pick up again (2024: 1.5%, 2025: 1.6%).
Most of the above developments were expected in very similar terms in the OeNB’s economic outlook of December 2022. Growth in Austria’s export markets will be somewhat weaker in 2023 and 2025 than anticipated in our previous outlook, the euro has appreciated somewhat, and oil prices are expected to be somewhat lower and interest rates slightly higher over the forecast horizon. Overall, the changed external environment has only a small impact on the OeNB’s current outlook. Our assumption here is that Russia’s war against Ukraine will not escalate further and that the supply of natural gas to Austria will not be disrupted over the forecast horizon.
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % | ||||
| Exports (real) | 13.0 | 2.9 | 2.7 | 3.0 |
| Imports (real) | 7.8 | 2.7 | 2.2 | 2.6 |
| % of nominal GDP | ||||
|
Current account
balance |
0.7 | 1.3 | 1.9 | 2.3 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
A number of leading export indicators point to a slowdown in the first half of 2023. Order backlogs are declining, given that new orders are dwindling and pent-up export orders have been reduced after supply chain problems have largely dissolved. However, the winter tourism season of 2022/2023 was successful, remaining only around 5% below the 2019 peak season. Exports of services currently play a greater role in the development of Austria’s overall exports than in recent years. Following exceptionally high post-pandemic growth of 13%, driven by catch-up effects, in 2022, Austria’s real export growth is projected to slow to 2.9% in 2023. Over the next two years, export growth will be supported by a rebound in export demand in the second half of 2023 and the recovery of inbound tourism from overseas. Overall, however, Austrian export growth rates will remain well below the long-term average observed prior to the COVID-19 pandemic (2000 to 2019: 4.4%). Growth in exports and the significant recovery in domestic demand will lead to stronger import growth from the second half of 2023. Starting from the low level reached in 2021 due to the pandemic, Austria’s current account balance is set to improve over the entire forecast horizon, which attests to the high degree of competitiveness of the Austrian economy. However, the rather significant increase in relative unit labor costs poses a downside risk to our outlook, especially if wage moderation does not materialize in 2024 and 2025 as assumed.
Although net exports will make a slightly positive contribution to economic growth from 2021 until the end of the forecast horizon, Austria’s high dependence on energy imports has led to significant outflows of income to the rest of the world since 2021. Global energy prices had already been rising above pre-pandemic levels during the second half of 2021. 2022 saw a further surge as a result of Russia’s war of aggression against Ukraine. Consequently, the price of Austria’s energy imports went up significantly. Chart 1 shows the income losses in the foreign trade balance caused by the higher prices of energy goods from the beginning of 2021 until the end of the forecast horizon in 2025. The expected decline in energy prices will cause income outflows from Austria to slow down, but they will remain negative over the entire forecast horizon. In the fourth quarter of 2022, income outflows peaked at –EUR 3.4 billion against Q1 21. In cumulative terms, we expect an income outflow of just over EUR 30 billion over the entire forecast horizon (2021–2025). This corresponds to an average annual outflow of around 1.5% of nominal GDP.
2 Investment activity in Austria is very subdued
While the Austrian economy grew at a very dynamic pace in 2022, gross fixed capital formation virtually stagnated. The deterioration in business sentiment triggered by Russia’s war against Ukraine, high energy costs and rising financing costs left their mark. Many of these factors will continue to weigh on investment decisions over the forecast horizon.
Having completed a pronounced cycle, housing investment plays a special role. Housing construction activity in Austria peaked in 2021 with 71,200 completed dwellings. Together with a slowdown in population growth, this has helped reduce the previous housing shortage and establish a relatively high degree of equilibrium in Austria’s housing market. Over the forecast horizon, higher interest rates on housing loans will impact the affordability of and, consequently, the demand for housing loans. Tighter lending standards for residential real estate financing, high land and construction costs as well as labor shortages will put an additional brake on housing investment. However, according to the current euro area bank lending survey, relevant and restrictive effects on lending much rather stem from demand-side than from supply-side developments (chart 2). Trends in building permits indicate a decline in housing construction activity in 2023 and 2024.
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % | ||||
| Gross fixed capital formation (real) | 0.4 | 0.4 | 0.6 | 1.4 |
| Investment in plant and equipment | –1.2 | –1.3 | 0.9 | 1.6 |
| Residential construction investment | –3.2 | –4.7 | –3.3 | 0.8 |
|
Nonresidential construction investment
and other investment |
0.5 | 3.1 | 1.2 | 0.9 |
| Investment in research and development | 5.8 | 3.1 | 2.1 | 2.2 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
Total gross fixed capital formation will practically stagnate again, at 0.4%, in 2023, while being fraught with a considerable downside risk. Despite a slight pickup in economic activity in the next two years, real gross fixed capital formation growth will remain well below its long-term pre-pandemic average in 2024 (0.6%) and 2025 (1.4%) (2000 to 2019: 1.7%). For both years, we expect weak growth in all subsectors of investment with the exception of residential investment, which will continue to decline in 2024. The investment-to-GDP ratio is forecast to decline from 26.1% in 2023 to 25.3% in 2025.
3 Robust labor market amid inflation-induced high wage gains
Total employment growth (employed and self-employed persons) in Austria is set to decelerate significantly, to 0.8% in 2023, from the very high levels recorded in 2022 (2.6%). In 2024 and 2025 (at 1.0% in both years), it will also continue to be in line with the long-term average. However, the number of total hours worked will fall by 0.1% (see box 1 for details on trends in hours worked), as firms try to maintain employment levels in particular in view of the continued labor shortages.
Labor supply growth will moderate slightly over the forecast horizon (chart 3). Austria’s labor force will stagnate in 2024 and decline slightly in 2025. The participation rate will increase marginally, mainly because the statutory retirement age for women will be raised. So far, the integration of Ukrainian refugees into the Austrian labor market has contributed only a small share (15,000 persons) to the growth of labor supply.
Despite the marked slowdown in economic activity, the unemployment rate (national definition) will rise only slightly in 2023, from 6.3% to 6.4%, while the unemployment rate according to Eurostat’s definition will increase from 4.8% to 5%. In 2024 and 2025, Austria’s unemployment rate will decline as the economy is set to recover (figures for 2025, national definition: 6.1%; Eurostat definition: 4.6%).
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % | ||||
| Total employment (persons) | 2.6 | 0.8 | 1.0 | 1.0 |
| Total hours worked | 3.0 | –0.1 | 0.9 | 0.9 |
| Compensation per employee | ||||
| Gross1 compensation (nominal) | 4.6 | 7.6 | 6.6 | 4.3 |
|
Collectively agreed wages
and salaries2 |
3.1 | 7.6 | 6.5 | 4.2 |
| Wage drift | 1.5 | 0.0 | 0.1 | 0.1 |
| Private consumption deflator | 8.6 | 7.4 | 4.1 | 2.9 |
| Gross1 compensation, real (HICP) | –3.7 | 0.2 | 2.4 | 1.3 |
| Net3 compensation, real (HICP) | –3.1 | 0.9 | 3.3 | 1.4 |
| Unemployment rate | % of labor supply | |||
| Eurostat definition | 4.8 | 5.0 | 4.8 | 4.6 |
| National definition | 6.3 | 6.4 | 6.2 | 6.1 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
| 1 Including employers’ social security contributions. | ||||
| 2 Overall economy. | ||||
| 3 After tax and social security contributions. | ||||
We expect collective wages to be raised by 7.6% in 2023, 6.5% in 2024 and 4.2% in 2025 (see box 2 for details on the wage-setting process in Austria). Nominal gross compensation per employee will rise at a similar rate as negotiated wages and we do not expect any significant overpayment.
Gross real wages per employee (deflated by the Harmonised Index of Consumer Prices) will hardly increase in 2023, following a pronounced decline in 2022. Net real wages will go up by 0.7% in 2023. We expect gross and net real wages to rise significantly in 2024 and 2025. The wage share of GDP will increase in 2023 and 2024, and hover around ½ percentage point above its 2019 pre-crisis level in 2025.
Average working hours have gone down sharply since COVID-19 crisis
Growth in total hours 2 worked in Austria has remained well below the comparable euro area rate since the pandemic. In 2022, it had not even reached the pre-crisis level of 2019. The table below shows the average annual change in labor volume (total hours worked) in Austria for selected periods, broken down into the part that is attributable to changes in average hours worked per employed person (at constant employment numbers) and the part that is attributable to changes in the number of employed persons (at constant average hours worked).
| Austria | Euro area | |
|---|---|---|
| 2020 to 2022 | ||
| Change in total hours worked | –0.5 | 0.1 |
|
of which: change in average
working hours |
–1.5 | –0.7 |
|
of which: change in number
of employees |
1.0 | 0.8 |
| 1999 to 2019 | ||
| Change in total hours worked | 0.5 | 0.5 |
|
of which: change in average
working hours |
–0.5 | –0.3 |
|
of which: change in number
of employees |
1.0 | 0.8 |
| 2023 to 2025 | ||
| Change in total hours worked | 0.6 | 0.9 |
|
of which: change in average
working hours |
–0.3 | 0.2 |
|
of which: change in number
of employees |
0.9 | 0.6 |
| Source: Eurostat (national accounts), OeNB. | ||
The number of total hours worked in Austria decreased by an average of –0.5% per year between 2020 and 2022 (euro area +0.1; table B1, top section), which is mainly attributable to the strong decline in average hours worked, namely by –1.5%. This decline was significantly stronger in Austria than in the euro area as a whole (–0.7%) and well above the average decline in hours worked per employee recorded in the period from 1999 to 2019 (table B1, middle section; –0.5%). This sharp contraction in average hours worked is remarkable also because average real GDP growth between 2020 and 2022 was even higher in Austria, at 0.9%, than in the euro area (0.7%).
According to the European Union Labour Force Survey (LFS), positive employment growth in Austria has been exclusively attributable to part-time work since 2019. While the number of full-time employees declined somewhat, that of persons working part-time has gone up significantly. By comparison, full-time employment growth in the euro area, which also stands at +2% according to LFS data, is almost entirely attributable to full-time employment. The part-time employment rate in Austria reached 30.3% at end-2022 (women: 50.3%, men: 12.5%), a historic high that is well above the euro area average of 21.4% (women: 34.1%, men 10.1%). A disaggregated analysis by age groups also shows that the largest increase in part-time work between 2019 and 2022 can be observed among persons aged 50 to 64. With regard to education levels, part-time work among men is found to have risen at about equal rates among those who have completed secondary and those who have completed tertiary education. For women, by contrast, part-time employment has risen predominantly among those who have completed tertiary education.
In the present outlook, we assume that, until the end of the forecast period in 2025, the average number of hours worked per employee will continue to decline in Austria, albeit at a somewhat slower pace than the long-term average (–0.3%) The Eurosystem staff macroeconomic projections for the euro area, by contrast, even point to a slight increase in average hours worked (+0.2%), which means that total hours worked are expected to grow more strongly in the euro area than in Austria (see table B1, bottom section).
How wage-setting works in Austria
In Austria, collectively agreed wages are quasi-automatically indexed to inflation. It is common practice to base collective wage bargaining on the average rate of consumer price growth observed over the past 12 months. And indeed, since the beginning of 2022, average collectively agreed wages in Austria have increased in line with average inflation (chart B2.1).
Wage settlements thus roughly follow the rule that wage increases should equal past inflation plus the growth rate of labor productivity. This rule aims at keeping the wage share constant. Usually “past inflation” is interpreted as consumer price inflation. (As we have seen, wage settlements in the past two years indeed followed consumer prices.) However, the defining equation of the wage share implies that to keep the wage share constant, wages should rise in accordance with output prices (i.e. the growth rate of the GDP deflator) rather than in accordance with consumer price inflation. In the past, these two price measures – consumer price inflation and the GDP deflator – have differed only marginally. However, as a result of the strongly negative terms-of-trade shock caused by the rise in import prices (mainly energy), the two measures have begun to diverge strongly (chart B2.2). For instance, if next fall’s wage settlement round for metal workers (traditionally the trendsetters for negotiations in other areas) considered consumer price inflation – including medium-term aggregate productivity growth – that would imply a rise in agreed wages by around 10%. If, by contrast, negotiations were based on the GDP deflator, this would result in a lower rise, by 7.6%.
The OeNB’s present economic outlook for Austria assumes a certain degree of wage moderation for the collective agreements. We thus assume that the negotiations in the upcoming wage rounds will be based on the GDP deflator as a price measure and not on consumer price developments. Consequently, the growth of negotiated wages, viewed in terms of the overall economy, is projected to decline from a rate of 7.6% in 2023 to 6.5% in 2024.
4 Wage increases lead to sharp rise in private consumption
At 3.1%, the agreed rise in wages for 2022 was well below the inflation rate measured that year. However, strong employment growth and government support measures dampened the resulting income losses, which meant that real disposable household income rose by 0.6%. 3 Wage settlements for 2023 are very high by historical standards. However, many pandemic-related measures are being phased out (temporary payments to pensioners and the unemployed, “climate bonus” and inflation compensation). As a result, government net transfers have dampened disposable household income. Overall, real income growth is expected to be negative in 2023. Household consumption will decline a lot less strongly, however, as parts of consumption are financed through savings. Compared with 2022, the saving ratio in Austria will fall.
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % | ||||
|
Disposable household
income (real) |
0.6 | –0.9 | 3.3 | 2.5 |
|
Private consumption
(real) |
4.9 | –0.2 | 2.3 | 1.6 |
|
% of nominal disposable
household income |
||||
| Saving ratio | 8.4 | 7.4 | 8.2 | 9.0 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
In 2024, real wage growth is expected to be very strong, reflecting the expected decline in inflation and continued high wage settlements. Developments in real disposable household income are further supported by continued high employment growth and an increase in pension payments. For similar reasons, real disposable household income will continue to rise strongly in 2025, albeit at a slower pace than in 2024. Households will use only some of these income gains for consumption purposes and will, instead, return to saving more. The saving ratio will rise to 9% of nominal disposable household income by the end of the forecast horizon, almost reaching its historic pre-pandemic average (2000–2019: 9.4%).
5 HICP inflation will come to 7.4% in 2023 and is expected to fall to just below 3% by 2025
Inflation in Austria rose to 8.6% in 2022. While initially, energy prices were the main driver of this marked rise in prices, in the second half of the year contributions also came from all other subcomponents. The expected decline in the inflation rate in 2023 will mainly be attributable to the weaker upward pressure on energy prices, but the dynamic price increase recorded in 2022 also has a dampening effect on annual inflation rates in 2023 as these are calculated in relation to the previous year’s prices. The futures prices for crude oil underlying this outlook will decline steadily until the end of 2025. Household energy prices on international wholesale markets have fallen sharply in recent months. This should dampen end user prices, especially from the second half of 2023 onward. However, as of mid-2024, the phasing-out of anti-inflationary measures (in particular the electricity price cap) will exert upward pressure on inflation. According to OeNB calculations, the direct downward impact of fiscal policy measures on HICP inflation in 2023 will amount to 1 percentage point (2022: 0.4 percentage points). The phasing-out of anti-inflationary measures will drive up inflation by 1 percentage point in 2024 and 0.4 percentage points in 2025. 4
Core inflation (excluding energy and food) is expected to increase to 7.1% in 2023 (2022: 5.1%). The main reason for this is the sharp rise in wage costs due to lags in wage compensation for inflation. In 2024 and 2025, core inflation will fall to 5.1% and 2.8%, respectively, thus remaining above the long-term average over the entire forecast horizon. Core inflation has accelerated to date, which – together with the expected strong wage increases – caused our current projection exercise to produce higher results than projected in our latest exercise in March 2023 (table 6).
| June 2023 outlook |
Revision to March 2023
outlook |
||||||
|---|---|---|---|---|---|---|---|
| 2022 | 2023 | 2024 | 2025 | 2022 | 2023 | 2024 | |
| Annual change in % | Percentage points | ||||||
| HICP | 8.6 | 7.4 | 4.1 | 2.9 | 0.5 | 0.1 | –0.2 |
| Food | 9.0 | 9.8 | 3.9 | 2.3 | 0.7 | –1.4 | –0.7 |
| Unprocessed food | 10.3 | 6.8 | x | x | 0.2 | x | x |
| Processed food | 8.7 | 10.5 | x | x | 0.8 | x | x |
|
Industrial goods
excluding energy |
5.8 | 6.7 | x | x | 1.3 | x | x |
| Energy | 39.8 | 5.6 | –3.7 | 4.6 | –3.8 | –3.3 | 1.4 |
| Services | 4.6 | 7.2 | x | x | 0.8 | x | x |
|
HICP excluding
energy |
5.8 | 7.6 | 4.9 | 2.7 | 0.9 | 0.5 | –0.4 |
|
HICP excluding
energy und food |
5.1 | 7.1 | 5.1 | 2.8 | 1.0 | 0.8 | –0.3 |
| Source: 2022: Statistics Austria; 2023 to 2025: OeNB June 2023 outlook. | |||||||
Stronger food price inflation in 2023 is partly attributable to rising price pressures stemming from wage increases. In addition, the decline in production costs is passed on to end user prices with a time lag. The decline in agricultural commodity prices and the marked fall in energy prices (fuels, gas and electricity) have so far been reflected only moderately in producer prices but should have an impact over the remainder of the forecast horizon. We expect food price inflation to slow down to 3.9% in 2024 and 2.3% in 2025. This means that, in 2025, inflation in this segment will only be slightly above the long-term average observed in the period from 1999 to 2019 (2.2%).
Austria’s fiscal energy relief measures only reduce inflation with a lag and by a small margin
This box shows what impact the fiscal energy relief measures the Austrian government took to support households and businesses had on inflation in Austria. It also presents a hypothetical scenario for Austria, based on the calculated impact we would have seen if Austria had implemented the same measures (in terms of size and structure) as the euro area. 5 , 6
With regard to the total volume of measures over the period from 2022 to 2024, 7 we find that – in relation to GDP – the packages Austria adopted to mitigate the effects of inflation on households are around 50% larger than the euro area average (6% vs 3.8%, exclusive of financing measures). A key factor explaining this difference is that, in Austria, wage tax, income tax and family benefits are now automatically indexed to inflation, and these components account for just under one-quarter of Austria’s support measures.
Indexation also plays an important role when comparing the structure of measures: Here, we must distinguish between price-related interventions (e.g. via indirect taxes), income-related measures (via direct transfers to households and income taxes) and subsidies to enterprises. For the period from 2022 to 2024, we see that Austria increasingly concentrates on income support measures (chart B3.1, purple/orange columns), whereas the euro area on average relies much more heavily on price measures (blue columns).
The effect of Austria’s fiscal energy relief measures on the HICP was around –0.2 percentage points in 2022 as the dampening effect of price measures (chart B3.2, blue columns) was significantly stronger than the upward effect of income measures (purple columns) of the same size. This contrasts strongly with our hypothetical scenario considering the impact the euro area measures would have had on Austria, as the euro area measures relied much less on transfer payments and much more on price measures in 2022. Moreover, in 2022 the fact that the temporary reduction of the value-added tax (VAT) rate on hotel, restaurant and cultural services expired in Austria had an effect of around +1 percentage point (chart B3.2, hatched green columns); 8 the euro area aggregate did not show any comparable effect. 9 Overall, Austria’s inflation rate would have been 1.8 percentage points lower in 2022 if Austria had applied the same measures as the euro area average, or 1 percentage point lower if we exclude the expiry of the temporary VAT rate cut (COVID-19-related measures).
In 2023, thanks to the electricity price cap and subsidies on energy bills, the overall downward impact of Austria’s fiscal measures on the HICP (–0.6 percentage points) will be stronger than in the hypothetical scenario. In 2024, under a “no policy change” assumption in both scenarios, many price measures can be expected to be dropped, which will result in a clear rebound effect. This effect will be marginally reinforced by the elimination of bracket creep in Austria (chart B3.2, included in the purple columns).
Corporate profits contributed heavily to domestic price pressures in 2022, with strong second-round effects in subsequent years 10
This box discusses whether corporate profits have fueled inflation in Austria in recent years. We look at the contribution of corporate profits to the increase in the value-added deflator, which is a measure of domestic price pressures that excludes imported or domestically purchased intermediate goods. 11
Corporate profits typically display a procyclical pattern: They rise during economic upturns and slow down during downturns. This pattern has also been observed over the past three years. In 2020, following the outbreak of the COVID-19 pandemic, corporate profits in Austria fell sharply (–14% year on year) and dampened inflation by 1.5 percentage points (as measured by the value-added deflator, inflation in Austria stood at 2% at the time, see below). This was followed by a recovery in 2021, when corporate profits went up by 10%, accounting for 1.2 percentage points of headline inflation (2.9%). In the 2022 boom year, when GDP grew by almost 5%, corporate profits soared (+24%) and thus contributed 4 percentage points (i.e. almost two-thirds) to the 6.4% increase in the value-added deflator. This is remarkable even though the economy expanded strongly in that year, as energy import prices rose sharply in the wake of the war in Ukraine and the resulting deterioration in terms of trade weighed on corporate profits. Corporate profits therefore played a key role in domestic price pressures in 2022. Over the period from 2020 to 2022, around one-third of headline inflation was attributable to corporate profits, which is a slightly higher share than the one-quarter share of profits in total value added.
Huge differences across sectors
The above result masks the high degree of heterogeneity across sectors observable in 2022. A small number of sectors have significantly increased their profits, while this rise is partly offset by developments in other sectors. The largest price increases were recorded in the energy, mining and water supply (NACE BDE) sectors (+35%), followed by construction (NACE F, +13%), agriculture and forestry (NACE A, +14%) and the transportation and storage sector (NACE H, +4.2%). In these sectors, inflation developments are almost entirely attributable to profits. By contrast, the manufacturing sector (NACE C), which is strongly exposed to international competition, was unable to pass on cost increases in full and thus recorded a marked decline in profits by 18% in 2022. Given high, energy price-driven inflation in 2022, a significant share of profits was shifted within the corporate sector.
2023–2024: Corporate profits no longer drive inflation, but strong second-round effects make inflation highly persistent
In the first quarter of 2023, the value-added deflator continued to rise more quickly, by 10.7% compared to 8.6% in Q4 22. About half of this increase is attributable to corporate profits. Like the energy, mining, water supply, construction, agriculture and forestry sectors, financial and insurance services also saw a strong, profit-driven rise in the value-added deflator. We expect corporate profits in Austria to come under pressure during the remainder of 2023 and in 2024. The fact that inflation was high in 2022 (due to energy price developments and corporate profits) will lead to second-round effects in 2023 and 2024 via stronger (delayed) wage increases and sharply rising replacement costs of capital stock depreciation. As a result, according to the OeNB’s present outlook, corporate profits will no longer be the main direct driver of inflation in 2023 and 2024.
6 Budget deficit well below 3% of GDP as temporary measures are being phased out
Over the forecast horizon, Austria’s budget balance is expected to improve gradually to –2.6% of GDP in 2023 and –1.9% of GDP in 2024 and 2025, respectively (from –3.2% of GDP in 2022). To illustrate the underlying factors, chart 6 breaks down the change in the budget balance vis-à-vis 2019 (+0.6% of GDP) into the contributions of various sets of discretionary measures, of changes in interest expenditure and of economic activity (other macroeconomic and windfall effects).
We find that the expected further improvements in the budget balance over the forecast horizon will be attributable to the phasing-out of a series of temporary fiscal measures. In 2023, these will be, in particular, COVID-19-related measures, such as subsidies paid out by the Austrian COVID-19 financing agency (COFAG) and COVID-19 testing (chart 6, blue columns), while energy relief packages (green columns) will be discontinued during 2024 and 2025. The slowdown in economic activity and the lagged impact of the rise in inflation on government expenditure will worsen macroeconomic effects (chart 6, purple columns). The elimination of bracket creep will contribute to a deterioration of the budget balance in 2024 and 2025: In 2024, the inflation reference value for raising tax brackets and tax allowances will be close to 10%, but increases in pensions and, in particular, wages will be significantly lower. As a result, revenue from wage and income tax will grow at a clearly slower pace than the tax base (the orange columns in chart 6 indicate this net effect).
Thanks to lower budget deficits and very high nominal economic growth, Austria’s debt-to-GDP ratio will fall sharply over the forecast horizon, to just under 71% of GDP in 2025. However, the strong rise in the yield curve leads to a marked increase in interest payments (chart 6, brown columns).
From 2023 onward, the volume of discretionary measures is not only set to decline strongly (sum of green, blue and yellow columns in chart 6, blue marks in chart 7), but there will also be a sizeable shift in the structure of these measures. COVID-19-related measures consisted mostly of payments to companies (mainly funds paid out by COFAG) and expenditure on goods and services (especially on COVID-19 testing). When these measures began to expire and the energy crisis started to evolve, government measures shifted toward supporting real household incomes. These measures comprised measures increasing nominal household income (mainly one-off payments; orange columns in chart 7) and measures reducing energy prices (mainly reduction of energy taxes and electricity price cap; green columns). 12 These measures offset part of the terms-of-trade losses for households discussed in section 1. Chart 8 shows that, despite the macroeconomic recovery, real disposable household income would have been around 5% (6%) below pre-crisis levels in 2022 (2023) in the absence of fiscal measures (purple columns 13 ). Given that these measures offset most of the losses incurred (around 90% in 2022 and around two-thirds in 2023), household incomes came in at only just below pre-crisis levels in both years. The strong real growth in wages and pensions expected for 2024 and 2025 will lead to a recovery of household incomes, but at the same time measures will be diminishing. This particularly concerns price measures such as the temporary reduction of energy taxes and the electricity price cap, while the CO2 tax, which has been in force since end-2022, will be increasing gradually.
7 Annex of tables
| June 2023 | Revisions since Dec. 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2023 | 2024 | 2025 | 2022 | 2023 | 2024 | 2025 | |
| Economic activity | Annual change in % (real) | |||||||
| Gross domestic product (GDP) | 4.9 | 0.5 | 1.7 | 1.6 | 0.1 | –0.1 | –0.1 | 0.1 |
| Private consumption | 4.9 | –0.2 | 2.3 | 1.6 | 0.3 | –0.3 | 0.2 | 0.2 |
| Government consumption | 3.6 | –0.3 | 0.0 | 0.7 | 2.5 | 0.2 | –0.4 | 0.1 |
| Gross fixed capital formation | 0.4 | 0.4 | 0.6 | 1.4 | 2.6 | 1.8 | –1.1 | –0.6 |
| Exports of goods and services | 13.0 | 2.9 | 2.7 | 3.0 | 4.3 | 1.2 | –0.6 | –0.7 |
| Imports of goods and services | 7.8 | 2.7 | 2.2 | 2.6 | 5.6 | 2.2 | –0.9 | –1.0 |
| % of nominal GDP | ||||||||
| Current account balance | 0.7 | 1.3 | 1.9 | 2.3 | 0.2 | 0.4 | 0.3 | –0.2 |
|
Import-adjusted contributions to real
GDP growth1 |
Percentage points | |||||||
| Private consumption | 1.6 | –0.2 | 0.8 | 0.5 | –0.4 | –0.3 | 0.1 | 0.1 |
| Government consumption | 0.6 | –0.1 | 0.0 | 0.1 | 0.4 | 0.0 | –0.1 | 0.0 |
| Gross fixed capital formation | 0.0 | 0.0 | 0.1 | 0.2 | –0.1 | 0.2 | –0.1 | 0.0 |
|
Domestic demand (excluding changes in
inventories) |
2.3 | –0.3 | 0.9 | 0.8 | –0.1 | –0.1 | 0.0 | 0.1 |
| Exports | 3.5 | 0.5 | 0.8 | 0.9 | 0.3 | –0.1 | –0.1 | 0.0 |
|
Changes in inventories (including statistical
discrepancy) |
–0.8 | 0.3 | 0.0 | 0.0 | –0.2 | 0.2 | 0.0 | 0.0 |
| Prices | Annual change in % | |||||||
|
Harmonised Index of Consumer Prices
(HICP) |
8.6 | 7.4 | 4.1 | 2.9 | 0.0 | 0.9 | 0.5 | 0.0 |
|
Private consumption expenditure (PCE)
deflator |
7.4 | 8.7 | 4.1 | 2.9 | –1.1 | 2.3 | 0.3 | –0.2 |
| GDP deflator | 4.9 | 7.7 | 4.7 | 3.7 | –1.8 | 1.9 | 0.7 | 0.1 |
| Unit labor costs (overall economy) | 2.2 | 7.9 | 5.9 | 3.6 | 0.4 | 1.1 | 0.6 | 0.6 |
| Compensation per employee (nominal) | 4.6 | 7.6 | 6.6 | 4.3 | 0.3 | 0.4 | 0.5 | 0.7 |
|
Compensation per hour worked
(nominal) |
4.5 | 8.4 | 6.6 | 4.3 | 0.8 | 0.3 | 0.6 | 0.9 |
| Import prices | 11.7 | 3.1 | 2.5 | 2.2 | –0.8 | –2.4 | 0.2 | 0.2 |
| Export prices | 7.9 | 3.8 | 3.6 | 3.0 | –0.6 | –0.1 | 0.3 | –0.2 |
| Terms of trade | –3.4 | 0.7 | 1.0 | 0.8 | 0.1 | 2.2 | 0.0 | –0.4 |
| Income and savings | ||||||||
| Real disposable household income | 0.6 | –0.9 | 3.3 | 2.5 | 3.0 | –0.7 | –0.8 | 0.5 |
| % of nominal disposable household income | ||||||||
| Saving ratio | 8.4 | 7.4 | 8.2 | 9.0 | 2.8 | 2.2 | 1.3 | 1.6 |
| Labor market | Annual change in % | |||||||
| Payroll employment | 2.9 | 1.1 | 1.1 | 1.0 | 0.0 | 0.6 | 0.1 | 0.1 |
| Hours worked (payroll employment) | 3.0 | 0.3 | 1.1 | 1.0 | –0.6 | 0.7 | 0.0 | –0.1 |
| % of labor supply | ||||||||
| Unemployment rate (Eurostat definition) | 4.8 | 5.0 | 4.8 | 4.6 | –0.1 | 0.1 | 0.1 | 0.0 |
| Unemployment rate (national definition) | 6.3 | 6.4 | 6.2 | 6.1 | 0.0 | –0.2 | –0.2 | –0.2 |
| Public finances | % of nominal GDP | |||||||
| Budget balance | –3.2 | –2.6 | –1.9 | –1.9 | –0.3 | –0.6 | 0.3 | 0.3 |
| Government debt | 78.4 | 75.2 | 72.7 | 70.9 | 1.2 | 0.8 | 0.2 | –0.2 |
| Source: 2022: Statistics Austria; 2023 to 2025: OeNB June 2023 outlook. | ||||||||
|
1 The import-adjusted growth contributions were calculated by offsetting
each final demand component with corresponding imports, which were obtained from input-output tables. |
||||||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Gross domestic product | Annual change in % (real) | |||
| World excluding the euro area | 3.3 | 3.1 | 3.1 | 3.3 |
| USA | 2.1 | 1.0 | 0.6 | 1.6 |
| China | 3.0 | 6.0 | 4.7 | 4.5 |
| India | 6.8 | 5.6 | 6.5 | 6.8 |
| Japan | 1.0 | 1.1 | 1.1 | 1.0 |
| Latin America | 3.8 | 1.8 | 2.1 | 2.4 |
| United Kingdom | 4.1 | 0.2 | 0.7 | 1.1 |
| CESEE EU member states1 | –2.8 | 0.9 | 2.0 | 2.0 |
| Switzerland | 2.1 | 0.7 | 1.2 | 1.4 |
| Euro area2 | 3.5 | 0.9 | 1.5 | 1.6 |
|
World trade (imports of goods
and services) |
Annual change in % (real) | |||
| World | 6.0 | 1.5 | 3.4 | 3.3 |
| World excluding the euro area | 5.3 | 1.3 | 3.4 | 3.4 |
|
Growth of euro area export
markets (real) |
6.3 | 0.5 | 3.1 | 3.1 |
|
Growth of Austrian export
markets (real |
7.1 | 1.0 | 3.3 | 3.1 |
| Prices | ||||
| Oil price, USD/barrel (Brent) | 103.7 | 78.0 | 72.6 | 70.4 |
| Three-month interest rate, % | 0.3 | 3.4 | 3.4 | 2.9 |
| Long-term interest rate, % | 1.7 | 3.1 | 3.2 | 3.3 |
| USD/EUR exchange rate | 1.1 | 1.1 | 1.1 | 1.1 |
|
Nominal effective exchange rate
of the euro (euro area index) |
116.8 | 121.2 | 121.5 | 121.5 |
| Source: Eurosystem. | ||||
| 1 Bulgaria, Croatia, Czechia, Hungary, Poland and Romania. | ||||
|
2 2022: Eurostat; 2023 to 2025: results of the
Eurosystem staff macroeconomic projections for the euro area of June 2023. |
||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Exports | Annual change in % | |||
|
Competitor prices in Austria’s
export markets |
16.2 | 0.0 | 2.8 | 2.4 |
| Export deflator | 7.9 | 3.8 | 3.6 | 3.0 |
| Changes in price competitiveness1 | 8.3 | –3.8 | –0.8 | –0.6 |
|
Import demand in Austria’s export
markets (real) |
7.1 | 1.0 | 3.3 | 3.1 |
|
Austrian exports of goods and
services (real) |
13.0 | 2.9 | 2.7 | 3.0 |
| Austrian market share | 5.9 | 1.8 | –0.6 | –0.1 |
| Imports | Annual change in % | |||
|
International competitor prices in
the Austrian market |
14.3 | 1.3 | 3.1 | 2.4 |
| Import deflator | 11.7 | 3.1 | 2.5 | 2.2 |
|
Austrian imports of goods and
services (real) |
7.8 | 2.7 | 2.2 | 2.6 |
| Terms of trade | –3.4 | 0.7 | 1.0 | 0.8 |
| Percentage points of real GDP | ||||
|
Contribution of net exports to
GDP growth |
3.1 | 0.2 | 0.4 | 0.4 |
| % of nominal GDP | ||||
| Export ratio | 61.8 | 61.0 | 60.9 | 61.3 |
| Import ratio | 60.4 | 59.0 | 58.1 | 57.8 |
| Source: 2022: Statistics Austria; 2023 to 2025: OeNB June 2023 outlook. | ||||
|
1 Changes in price competitiveness are defined as the difference between
changes in competitor prices in Austria’s export markets and changes in the export deflator. |
||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| % of nominal GDP | ||||
| Balance of trade | 1.4 | 2.1 | 2.7 | 3.1 |
| Balance of goods | –0.1 | 0.2 | 0.5 | 0.7 |
| Balance of services | 1.6 | 1.8 | 2.2 | 2.5 |
| Balance of primary income1 | –0.2 | –0.2 | –0.2 | –0.2 |
| Balance of secondary income2 | –0.5 | –0.6 | –0.6 | –0.6 |
| Current account balance | 0.7 | 1.3 | 1.9 | 2.3 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
|
1 Balance of income (e.g. labor compensation,
investment income). |
||||
| 2 Balance of current transfers. | ||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % | ||||
| Payroll employment | 2.9 | 1.1 | 1.1 | 1.0 |
| Wages and salaries per employee | 4.6 | 7.6 | 6.6 | 4.3 |
| Compensation of employees | 7.6 | 8.7 | 7.8 | 5.4 |
| Property income | –4.1 | 3.7 | 4.4 | 4.8 |
|
Self-employment income and
operating surpluses (net) |
12.0 | 3.2 | 3.8 | 3.4 |
|
Contribution to household disposable
income growth in percentage points |
||||
| Compensation of employees | 6.7 | 7.6 | 6.9 | 4.8 |
| Property income | –0.4 | 0.3 | 0.3 | 0.3 |
|
Self-employment income and
operating surpluses (net) |
1.9 | 0.5 | 0.6 | 0.5 |
| Net transfers less direct taxes1 | –0.1 | –0.9 | –0.2 | –0.2 |
| Annual change in % | ||||
|
Disposable household income
(nominal) |
8.0 | 7.6 | 7.5 | 5.4 |
| Consumption deflator | 7.4 | 8.7 | 4.1 | 2.9 |
|
Disposable household income
(real) |
0.6 | –0.9 | 3.3 | 2.5 |
| Private consumption (real) | 4.9 | –0.2 | 2.3 | 1.6 |
|
% of nominal disposable household
income growth |
||||
| Saving ratio | 8.4 | 7.4 | 8.2 | 9.0 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
|
1 Negative values indicate an increase in (negative) net transfers
less direct taxes; positive values indicate a decrease. |
||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Annual change in % | ||||
|
Total gross fixed capital formation
(real) |
0.4 | 0.4 | 0.6 | 1.4 |
| of which: | ||||
| investment in plant and equipment | –1.2 | –1.3 | 0.9 | 1.6 |
| residential construction investment | –3.2 | –4.7 | –3.3 | 0.8 |
|
nonresidential construction investment
and other investment |
0.5 | 3.1 | 1.2 | 0.9 |
| investment in research and development | 5.8 | 3.1 | 2.1 | 2.2 |
| public sector investment | –3.4 | 6.1 | 2.2 | 1.6 |
| private investment | 1.0 | –0.4 | 0.4 | 1.4 |
|
Contribution to real gross fixed capital
formation growth |
Percentage points | |||
| Investment in plant and equipment | –0.4 | –0.4 | 0.3 | 0.5 |
| Residential construction investment | –0.6 | –0.8 | –0.6 | 0.1 |
|
Nonresidential construction investment
and other investment |
0.1 | 0.8 | 0.3 | 0.2 |
| Investment in research and development | 1.3 | 0.7 | 0.5 | 0.5 |
| Percentage points | ||||
| Total gross fixed capital formation | 0.1 | 0.1 | 0.1 | 0.3 |
| Changes in inventories | –0.8 | 0.0 | –0.1 | 0.0 |
| % of nominal GDP | ||||
| Investment ratio | 26.1 | 25.9 | 25.4 | 25.3 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Employment | Annual change in % | |||
| Total employment (persons) | 2.6 | 0.8 | 1.0 | 1.0 |
| Payroll employmen (persons) | 2.9 | 1.1 | 1.1 | 1.0 |
| of which: public sector employees | 1.0 | 0.4 | 0.4 | 0.4 |
| Self-employment (persons) | 0.5 | –1.1 | 0.2 | 0.4 |
| Total hours worked | 3.0 | –0.1 | 0.9 | 0.9 |
| Payroll employment (hours) | 3.0 | 0.3 | 1.1 | 1.0 |
| Self-employment (hours) | 3.0 | –1.8 | 0.1 | 0.2 |
| Labor supply | 1.2 | 1.1 | 0.8 | 0.7 |
| Registered unemployment | –21.5 | 7.2 | –3.9 | –3.9 |
| Unemployment rate | % of labor supply | |||
| Eurostat definition | 4.8 | 5.0 | 4.8 | 4.6 |
| National definition | 6.3 | 6.4 | 6.2 | 6.1 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| Gross wages and salaries1 | Annual change in % | |||
| In nominal terms | 7.6 | 8.7 | 7.8 | 5.4 |
| Consumption deflator | 7.4 | 8.7 | 4.1 | 2.9 |
| In real terms | 0.3 | 0.0 | 3.7 | 2.5 |
| Collectively agreed wages and salaries1 | 3.1 | 7.6 | 6.5 | 4.2 |
| Wage drift | 1.5 | 0.0 | 0.1 | 0.1 |
| Compensation per employee | ||||
| Gross2 compensation (nominal) | 4.6 | 7.6 | 6.6 | 4.3 |
|
Gross compensation (real, private
consumption expenditure deflator) |
–2.5 | –1.1 | 2.4 | 1.4 |
|
Net3 compensation (real, private
consumption expenditure deflator) |
–2.0 | –0.3 | 3.3 | 1.5 |
| Compensation per hour worked | ||||
| Gross compensation (nominal) | 4.5 | 8.4 | 6.6 | 4.3 |
|
Gross compensation (real, private
consumption expenditure deflator) |
–2.7 | –0.2 | 2.4 | 1.4 |
| % of nominal GDP | ||||
| Wage share | 48.4 | 48.6 | 49.2 | 49.2 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
| 1 Overall economy. | ||||
| 2 Including employers’ social security contributions. | ||||
| 3 After tax and social security contributions. | ||||
| 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|
| HICP and subcomponents | Annual change in % | |||
|
Harmonised Index of Consumer
Prices (HICP) |
8.6 | 7.4 | 4.1 | 2.9 |
| Food | 9.0 | 9.8 | 3.9 | 2.3 |
| Unprocessed food | 10.2 | 5.4 | x | x |
| Processed food | 8.5 | 8.6 | x | x |
| Industrial goods excluding energy | 5.6 | 5.3 | x | x |
| Energy | 39.8 | 5.6 | –3.7 | 4.6 |
| Electricity | 11.1 | 1.5 | 19.1 | 8.1 |
| Natural gas | 80.9 | 28.9 | –2.8 | –17.2 |
| Liquid fuels | 47.8 | –11.8 | –5.9 | –2.8 |
| Services | 4.6 | 5.9 | x | x |
| HICP excluding energy | 5.8 | 7.6 | 4.9 | 2.7 |
|
HICP excluding energy and
unprocessed food |
5.1 | 7.1 | 5.1 | 2.8 |
| Deflators (national accounts) | ||||
|
Private consumption expenditure
(PCE) deflator |
7.4 | 8.7 | 4.1 | 2.9 |
| Investment deflator | 8.3 | 6.8 | 4.0 | 3.5 |
| Import deflator | 11.7 | 3.1 | 2.5 | 2.2 |
| Export deflator | 7.9 | 3.8 | 3.6 | 3.0 |
| Terms of trade | –3.4 | 0.7 | 1.0 | 0.8 |
| GDP deflator at factor costs | 4.8 | 6.4 | 4.7 | 3.7 |
|
Source: 2022: Statistics Austria; 2023 to 2025:
OeNB June 2023 outlook. |
||||
| 2023 | 2024 | 2025 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Annual change in % | ||||||
| June 2023 outlook | 0.5 | 1.7 | 1.6 | 7.4 | 4.1 | 2.9 |
| December 2022 outlook | 0.6 | 1.7 | 1.6 | 6.5 | 3.6 | 2.9 |
| Difference | –0.1 | –0.1 | 0.1 | 0.9 | 0.5 | 0.0 |
| Caused by: | Percentage points | |||||
| External assumptions | 0.1 | 0.0 | –0.1 | –0.6 | 0.2 | 0.0 |
| New data1 | 0.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| of which: | ||||||
|
revisions to historical data
up to Q3 22 |
–0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
|
projection errors for Q4 22
and Q1 23 |
0.5 | 0.0 | 0.0 | 0.6 | 0.0 | 0.0 |
| Other reasons2 | –0.4 | –0.1 | 0.2 | 0.9 | 0.3 | 0.0 |
|
Source: 2022: OeNB June 2023 and December 2023 outlook. The sum
of growth contributions subject to individual revisions may differ from the overall revision due to differences in rounding. |
||||||
|
1 “New data” refer to data on GDP and/or inflation that have become
available since the publication of the preceding OeNB outlook. |
||||||
|
2 Different assumptions about trends in domestic variables such as
wages, government consumption, effects of tax measures, other changes in assessments and model changes. |
||||||
| OeNB | WIFO | IHS | OECD | IMF |
European
Commission |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 2023 | March 2023 | March 2023 | June 2023 | April 2023 | May 2023 | ||||||||
| 2023 | 2024 | 2025 | 2023 | 2024 | 2023 | 2025 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | |
| Main results | Annual change in % | ||||||||||||
| GDP (real) | 0.5 | 1.7 | 1.6 | 0.3 | 1.8 | 0.5 | 1.4 | 0.2 | 1.6 | 0.4 | 1.1 | 0.4 | 1.6 |
| Private consumption (real) | –0.2 | 2.3 | 1.6 | 1.3 | 2.0 | 0.6 | 1.8 | –0.2 | 2.3 | x | x | 1.4 | 2.1 |
|
Government consumption
(real) |
–0.3 | 0.0 | 0.7 | 0.2 | 0.6 | –1.3 | –0.8 | –0.2 | 0.6 | x | x | –0.4 | 0.3 |
|
Gross fixed capital formation
(real) |
0.4 | 0.6 | 1.4 | 0.0 | 1.0 | –0.7 | 1.0 | 0.3 | 1.1 | x | x | 0.0 | 1.1 |
| Exports (real) | 2.9 | 2.7 | 3.0 | 2.0 | 3.3 | 1.7 | 3.2 | 3.2 | 2.7 | 5.9 | 2.1 | 1.5 | 2.5 |
| Imports (real) | 2.7 | 2.2 | 2.6 | 2.1 | 3.2 | 1.1 | 3.2 | 2.8 | 2.7 | 4.6 | 1.7 | 2.0 | 2.3 |
| Labor productivity1 | –0.3 | 0.7 | 0.7 | –0.1 | 0.8 | –0.5 | 0.5 | 1.0 | 1.0 | x | x | –0.2 | 0.7 |
| GDP deflator | 7.7 | 4.7 | 3.7 | 7.1 | 4.2 | 6.4 | 3.7 | 7.5 | 3.5 | 7.8 | 2.6 | 7.2 | 4.2 |
| CPI | x | x | x | 7.1 | 3.8 | 7.5 | 3.5 | x | x | x | x | x | x |
| HICP | 7.4 | 4.1 | 2.9 | 7.3 | 3.5 | 7.5 | 3.5 | 8.0 | 3.9 | 8.2 | 3.0 | 7.1 | 3.8 |
| Unit labor costs | 7.9 | 5.9 | 3.6 | 8.7 | 7.2 | 8.1 | 5.7 | 1.3 | 1.3 | x | x | 8.5 | 5.9 |
| Payroll employment2 | 0.8 | 1.0 | 1.0 | 0.8 | 1.3 | 1.0 | 0.9 | 1.4 | 0.6 | –0.1 | 0.3 | 0.6 | 0.9 |
| % of labor supply | |||||||||||||
|
Unemployment rate3
(Eurostat definition) |
5.0 | 4.8 | 4.6 | 4.7 | 4.5 | 4.9 | 4.8 | 5.0 | 5.1 | 5.3 | 5.6 | 4.9 | 5.0 |
| % of nominal GDP | |||||||||||||
| Current account balance | 1.3 | 1.9 | 2.3 | 1.6 | 2.1 | x | x | 1.4 | 1.3 | 1.2 | 0.6 | 0.8 | 1.2 |
|
Budget balance
(Maastricht definition) |
–2.6 | –1.9 | –1.9 | –1.8 | –0.4 | –2.9 | –2.3 | –3.2 | –1.6 | –2.7 | –1.5 | –2.4 | –1.3 |
| Technical assumptions | |||||||||||||
| Oil price, USD/barrel (Brent) | 78.0 | 72.6 | 70.4 | 84.0 | 80.0 | 82.0 | 77.0 | 77.4 | 75.0 | 73.1 | 68.9 | 85.0 | 78.0 |
| Short-term interest rate, % | 3.4 | 3.4 | 2.9 | 3.9 | 4.7 | 3.6 | 3.9 | 3.2 | 3.4 | 2.8 | 3.0 | 3.3 | 3.3 |
| USD/EUR exchange rate | 1.08 | 1.09 | 1.09 | 1.09 | 1.20 | 1.08 | 1.08 | 1.04 | 1.04 | 1.06 | 1.05 | 1.09 | 1.10 |
| Annual change in % | |||||||||||||
| Euro area GDP (real) | 0.9 | 1.5 | 1.6 | 0.7 | 1.6 | 0.6 | 1.5 | 0.9 | 1.5 | 0.8 | 1.4 | 1.1 | 1.6 |
| US GDP (real) | 1.0 | 0.6 | 1.6 | 1.0 | 1.5 | 1.1 | 1.3 | 1.6 | 1.0 | 1.6 | 1.1 | 1.4 | 1.0 |
| World GDP (real) | 2.9 | 2.9 | 3.1 | x | x | 2.6 | 2.9 | 2.7 | 2.9 | 2.8 | 3.0 | 2.8 | 3.1 |
| World trade4 | 1.5 | 3.4 | 3.3 | x | x | 1.3 | 3.7 | 1.6 | 3.8 | 2.4 | 3.5 | 1.6 | 3.1 |
| Source: OeNB, WIFO, IHS, OECD, IMF, European Commission. Note: x = no data available. | |||||||||||||
| 1 OeNB, WIFO: GDP per hour worked. IHS, OECD, European Commission: GDP per employee. | |||||||||||||
| 2 WIFO, IHS: based on active payroll. | |||||||||||||
| 3 WIFO: percentage of persons in payroll employment (national definition). | |||||||||||||
| 4 IHS: goods according to CPB; European Commission: world imports. | |||||||||||||
| 2022 | 2023 | 2024 | 2025 | 2022 | 2023 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | |||||
| Prices, wages and costs | Annual change in % | |||||||||
| HICP | 8.6 | 7.4 | 4.1 | 2.9 | 5.5 | 7.9 | 9.9 | 11.1 | 10.6 | 8.8 |
|
HICP excluding energy and
food |
5.8 | 7.6 | 4.9 | 2.7 | 3.5 | 5.2 | 6.5 | 8.1 | 9.1 | 8.5 |
|
Private consumption expenditure
deflator |
7.4 | 8.7 | 4.1 | 2.9 | 4.3 | 6.6 | 8.7 | 9.7 | 11.1 | 9.5 |
|
Gross fixed capital formation
deflator |
8.3 | 6.8 | 4.0 | 3.5 | 7.0 | 8.3 | 8.9 | 8.9 | 8.6 | 6.9 |
| GDP deflator | 4.9 | 7.7 | 4.7 | 3.7 | 3.4 | 4.4 | 5.2 | 6.5 | 7.3 | 8.3 |
| Unit labor costs | 2.2 | 7.9 | 5.9 | 3.6 | 0.8 | 1.6 | 3.6 | 3.0 | 4.5 | 8.9 |
| Nominal wages per employee | 4.6 | 7.6 | 6.6 | 4.3 | 4.9 | 5.0 | 4.2 | 4.4 | 4.9 | 7.9 |
| Productivity | 2.3 | –0.3 | 0.7 | 0.7 | 4.0 | 3.3 | 0.6 | 1.4 | 0.4 | –0.8 |
| Real wages per employee | –2.5 | –1.1 | 2.4 | 1.4 | 0.5 | –1.6 | –4.1 | –4.9 | –5.6 | –1.4 |
| Import deflator | 11.7 | 3.1 | 2.5 | 2.2 | 11.4 | 13.1 | 12.4 | 9.9 | 5.3 | 2.3 |
| Export deflator | 7.9 | 3.8 | 3.6 | 3.0 | 7.6 | 8.7 | 8.3 | 6.9 | 4.4 | 3.0 |
| Terms of trade | –3.4 | 0.7 | 1.0 | 0.8 | –3.4 | –3.9 | –3.6 | –2.7 | –0.9 | 0.6 |
| Economic activity | Annual and/or quarterly changes in % (real) | |||||||||
| GDP | 4.9 | 0.5 | 1.7 | 1.6 | 1.3 | 1.7 | 0.0 | –0.1 | 0.1 | –0.2 |
| Private consumption | 4.9 | –0.2 | 2.3 | 1.6 | 2.9 | –0.5 | –0.6 | –1.5 | 0.4 | 0.7 |
| Government consumption | 3.6 | –0.3 | 0.0 | 0.7 | 0.3 | 0.8 | 0.2 | 3.0 | –2.7 | 0.0 |
| Gross fixed capital formation | 0.4 | 0.4 | 0.6 | 1.4 | 2.2 | –1.7 | –0.4 | 3.8 | –1.5 | –0.4 |
| Exports | 13.0 | 2.9 | 2.7 | 3.0 | 1.9 | 4.3 | 1.5 | 0.3 | 0.9 | –0.5 |
| Imports | 7.8 | 2.7 | 2.2 | 2.6 | 2.4 | 0.2 | 0.9 | –0.1 | 1.9 | –0.2 |
| Contribution to real GDP growth in percentage points | ||||||||||
| Domestic demand | 2.3 | –0.3 | 0.9 | 0.8 | 0.8 | 0.4 | –0.4 | 0.3 | –0.6 | 0.1 |
| Net exports | 3.5 | 0.5 | 0.8 | 0.9 | 0.0 | 1.9 | 0.3 | 0.1 | 0.0 | –0.3 |
| Changes in inventories | –0.8 | 0.3 | 0.0 | 0.0 | 0.4 | –0.6 | 0.2 | –0.5 | 0.7 | 0.0 |
| Labor market | % of labor supply | |||||||||
|
Unemployment rate (Eurostat
definition) |
4.8 | 5.0 | 4.8 | 4.6 | 4.6 | 4.4 | 5.0 | 5.0 | 4.8 | 5.0 |
| Annual and/or quarterly changes in % | ||||||||||
| Total employment | 2.6 | 0.8 | 1.0 | 1.0 | 0.7 | 0.4 | 0.1 | 0.3 | 0.5 | –0.2 |
| of which: private sector | 2.9 | 0.9 | 1.1 | 1.1 | 0.8 | 0.4 | 0.1 | 0.4 | 0.6 | –0.3 |
| Payroll employment | 2.9 | 1.1 | 1.1 | 1.0 | 0.7 | 0.5 | 0.2 | 0.5 | 0.6 | –0.1 |
| Additional variables | Annual and/or quarterly changes in % (real) | |||||||||
| Disposable household income | 0.6 | –0.9 | 3.3 | 2.5 | –0.9 | –2.0 | 10.2 | –10.3 | –0.1 | 4.3 |
| % of real GDP | ||||||||||
| Output gap | 0.4 | –0.5 | –0.3 | 0.0 | –0.3 | 1.0 | 0.7 | 0.3 | 0.0 | –0.6 |
|
Source: 2022: Statistics Austria; 2023
to 2025: OeNB June 2023 outlook. Note: Quarterly values based on seasonally and working day-adjusted data. |
||||||||||
| 2023 | 2024 | 2025 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
| Prices, wages and costs | Annual change in % | |||||||||
| HICP | 6.0 | 4.4 | 3.9 | 3.8 | 4.5 | 4.2 | 3.6 | 3.1 | 2.6 | 2.3 |
| HICP excluding energy and food | 7.1 | 5.8 | 5.1 | 5.0 | 5.0 | 4.4 | 3.4 | 2.7 | 2.4 | 2.3 |
|
Private consumption expenditure
deflator |
7.7 | 6.6 | 5.0 | 4.0 | 3.7 | 3.9 | 3.5 | 3.2 | 2.6 | 2.3 |
|
Gross fixed capital formation
deflator |
6.1 | 5.6 | 4.5 | 4.1 | 3.8 | 3.6 | 3.5 | 3.5 | 3.5 | 3.4 |
| GDP deflator | 8.0 | 7.3 | 5.7 | 4.4 | 4.4 | 4.5 | 4.2 | 3.9 | 3.5 | 3.1 |
| Unit labor costs | 9.3 | 9.0 | 8.6 | 5.3 | 5.0 | 4.8 | 4.4 | 3.8 | 3.2 | 2.8 |
| Nominal wages per employee | 8.5 | 8.8 | 9.3 | 6.0 | 5.8 | 5.6 | 4.9 | 4.5 | 3.9 | 3.7 |
| Productivity | –0.7 | –0.2 | 0.6 | 0.7 | 0.7 | 0.7 | 0.5 | 0.7 | 0.7 | 0.9 |
| Real wages per employee | 0.8 | 2.1 | 4.1 | 2.0 | 2.0 | 1.6 | 1.4 | 1.3 | 1.3 | 1.4 |
| Import deflator | 2.1 | 2.6 | 2.9 | 2.6 | 2.3 | 2.3 | 2.5 | 2.4 | 2.1 | 1.7 |
| Export deflator | 3.2 | 4.8 | 4.1 | 3.7 | 3.3 | 3.2 | 3.1 | 3.1 | 3.0 | 2.8 |
| Terms of trade | 1.1 | 2.1 | 1.2 | 1.0 | 1.0 | 0.9 | 0.7 | 0.6 | 0.8 | 1.0 |
| Economic activity | Annual and/or quarterly changes in % (real) | |||||||||
| GDP | 0.1 | 0.4 | 0.6 | 0.5 | 0.5 | 0.4 | 0.4 | 0.4 | 0.3 | 0.3 |
| Private consumption | 0.7 | 0.6 | 0.6 | 0.6 | 0.6 | 0.5 | 0.4 | 0.3 | 0.3 | 0.3 |
| Government consumption | –0.1 | 0.0 | 0.0 | 0.1 | 0.0 | 0.2 | 0.3 | 0.2 | 0.2 | 0.1 |
| Gross fixed capital formation | –0.1 | 0.2 | 0.2 | 0.2 | 0.3 | 0.4 | 0.4 | 0.3 | 0.3 | 0.3 |
| Exports | 0.3 | 0.8 | 1.0 | 0.8 | 0.7 | 0.7 | 0.8 | 0.8 | 0.7 | 0.7 |
| Imports | 0.6 | 0.7 | 0.5 | 0.6 | 0.6 | 0.7 | 0.7 | 0.6 | 0.6 | 0.6 |
| Contribution to real GDP growth in percentage points | ||||||||||
| Domestic demand | 0.1 | 0.2 | 0.3 | 0.3 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.1 |
| Net exports | 0.0 | 0.2 | 0.4 | 0.3 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| Changes in inventories | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Labor market | % of labor supply | |||||||||
|
Unemployment rate (Eurostat
definition) |
5.1 | 5.0 | 5.0 | 4.8 | 4.7 | 4.6 | 4.6 | 4.6 | 4.5 | 4.6 |
| Annual and/or quarterly changes in % | ||||||||||
| Total employment | 0.0 | 0.3 | 0.3 | 0.4 | 0.3 | 0.3 | 0.2 | 0.1 | 0.1 | 0.1 |
| of which: private sector | 0.0 | 0.3 | 0.3 | 0.5 | 0.4 | 0.4 | 0.3 | 0.1 | 0.1 | 0.1 |
| Payroll employment | –0.1 | 0.2 | 0.3 | 0.5 | 0.5 | 0.4 | 0.2 | 0.1 | 0.1 | 0.0 |
| Additional variables | Annual and/or quarterly changes in % (real) | |||||||||
| Disposable household income | –0.6 | 0.3 | 0.8 | 1.1 | 0.9 | 0.9 | 0.6 | 0.4 | 0.1 | 0.2 |
| % of real GDP | ||||||||||
| Output gap | –0.8 | –0.8 | –0.5 | –0.3 | –0.2 | –0.1 | –0.1 | 0.0 | 0.0 | 0.0 |
|
Source: 2022: Statistics Austria; 2023
to 2025: OeNB June 2023 outlook. Note: Quarterly values based on seasonally and working day-adjusted data. |
||||||||||
1 Oesterreichische Nationalbank, Business Cycle Analysis Section, friedrich.fritzer@oenb.at, mathias.moser@oenb.at, christian.ragacs@oenb.at, lukas.reiss@oenb.at, alfred.stiglbauer@oenb.at and klaus.vondra@oenb.at. With contributions from Gerhard Fenz, Birgit Niessner and Beate Resch.
2 All figures refer to total employment (employed and self-employed persons).
3 In the OeNB outlook, disposable household income is based on national accounts and sector accounts data. To ensure consistency with other national accounts data, the OeNB uses the consumption deflator to deflate nominal household income, even though consumers rather rely on the consumer price index (or the HICP). Normally, the dynamics of the consumption deflator and the HICP are very similar. However, they began to differ significantly in 2022 and the first quarter of 2023, meaning that the consumption deflator will grow more strongly than HICP inflation in 2023. Chart 4 therefore also shows the growth in real disposable household income deflated by HICP inflation. Real disposable household income growth deflated by HICP inflation will be slightly positive in 2023.
4 Only direct inflation effects are taken into account.
5 This analysis expands and updates the assessment presented in “Österreichs Fiskal-Maßnahmen zur Inflationsbekämpfung unterschieden sich 2022 deutlich von jenen des Euroraum-Schnitts” (in German only). For the purpose of this analysis, we also took into account support measures for businesses and used information provided by the national central banks and the ECB that allow for higher precision in assigning time- and content-related information. As these are internal Eurosystem data, they are only comparable with the euro area aggregate.
6 Our analysis is limited to the impact of fiscal measures. Price caps are only taken into account if they trigger government expenditure (to directly subsidize prices and/or to cover losses incurred by energy producers). Purely government-imposed price caps without budgetary effects are therefore not considered, for example.
7 A small proportion of the measures taken in the euro area began to be effective already in 2021, and their effects have been added to the results for 2022 to improve comparability. Germany’s electricity and gas price caps are classified as price measures in line with Bankowski et al. (2023) .
8 Tax cuts expiring in 2022 are shown separately in the hatched green columns in chart B3.2, given their direct relevance for the HICP, and are not subsumed under “HICP, unchanged fiscal policy measures” (green columns), although technically speaking they are not discretionary measures taken in response to the energy and inflation crises. The green columns therefore show the residual resulting from expiring tax cuts plus energy relief measures and thus also include the effects of other fiscal measures, e.g. the discontinuation of the remaining COVID-19-related income support measures.
9 According to Eurostat data, the direct contribution of nonenergy tax changes to HICP inflation was 1 percentage point in Austria and 0.1 percentage point in the euro area.
10 Authors: friedrich.fritzer@oenb.at, lukas.reiss@oenb.at and martin.schneider@oenb.at, Business Cycle Analysis Section, OeNB.
11 The contributions of corporate profits to this inflation measure are carefully adjusted for depreciation and amortization, taxes on production and subsidies. For reasons of data availability, the real estate sector, the information and communication sector and the public sector were excluded from the calculation.
12 However, the energy relief packages also comprised two other major measures, namely the setting up of a strategic gas reserve in 2022 (around 0.8% of GDP) and energy bill subsidies for companies for 2022 and 2023.
13 In the calculation of real income excluding fiscal measures, second-round effects were not taken into account, i.e. the volumes of measures were simply subtracted from actual developments in real income.
How have profits been shaping domestic price pressures in Austria?
Friedrich Fritzer, Doris Prammer, Lukas Reiss, Martin Schneider 14
Refereed by: Josef Baumgartner, WIFO
There is an ongoing debate as to whether profits have been driving inflation in Austria and in the euro area. We address this question by decomposing the value added deflator for the Austrian economy into its income components: compensation of employees, net operating surplus, consumption of fixed capital and taxes less subsidies on production. Furthermore, we conduct this decomposition not only for the economy as a whole but also for major sectors of the economy. In 2022, the value added deflator for the Austrian economy grew at a rate of 6.4%. Profits contributed 4.0 percentage points thereof, thus accounting for more than half of value added inflation. To assess whether profits have been driving up inflation disproportionately, we calculate the contribution of all income components on a balanced growth path, which leaves the income components’ impact on value added constant, and define any growth above this threshold as nonneutral or disproportionate. We thus see that in 2022 nonneutral profits explained more than one-third (2.5 percentage points) of domestic inflation. With respect to sectoral developments, energy (including water supply and waste management), construction and agriculture (including forestry) as well as financial and insurance activities contributed most to the growth of the value added deflator. In 2023 and 2024, the inflation contribution of profits will decline owing to the expected strong growth of unit labor costs and the increasing contribution of depreciation. Over the period from 2020 to 2024, the average nonneutral profit contribution to the growth of the value added deflator will be minor judging from the OeNB’s most recent macroeconomic projections.
JEL classification: E31, D33
Keywords: domestic price pressure, profit share
Energy imports were the main driver of the high inflation rates measured in 2022. With enterprises and their employees seeking to sustain their real income levels by charging higher prices and demanding higher wages, respectively, inflation has since spread to other product groups. Given the cause-and-effect relationship between rising wages and rising prices and their potential to spark inflation further, the ECB has been keeping an eye on these developments (Arce et al., 2023). In Austria, a public debate has emerged about the sources of the domestic price pressures. A recurrent theme is whether the sharp increases in inflation have been fueled by an excessive rise in corporate profits 15 in some sectors.
This publication addresses this question by decomposing the value added deflator for the economy as a whole and for individual sectors. Value added deflators measure the price of value added through the domestic production of goods and services. This perspective significantly differs from tracking the prices payable by consumers for goods and services (including imports), which we do with the Harmonised Index of Consumer Prices (HICP). Moreover, value added goes beyond the production of consumer goods and services by covering also the production of the other demand components (exports, gross capital formation and public consumption). As is evident from chart 1, the value added deflator for the economy as a whole and HICP inflation moved broadly in sync between 2000 and 2021. In 2022, the rising cost of energy imports pushed up the HICP by 8.6%, well beyond the 4.7% increase of the value added deflator for the overall economy. 16 Note that, due to data issues, the analysis below does not cover the real estate sector, the information and communication sector and the public sector. When we exclude these sectors, the value added deflator for the Austrian economy rose by 6.4% in 2022.
Method for decomposing the value added deflator
The value added deflator for industry i describes domestic price pressures, recording the development of prices for domestic value added, excluding imported and domestically produced intermediate goods.
17
Value added consists of compensation of employees,
18
net taxes on production (= other indirect taxes on production less other subsidies), depreciation and amortization and net operating surplus or profit.
19
A simple decomposition (for details see annex 1) shows the percentage change of the value added deflator for each sector i
expressed as the weighted sum of unit cost changes.
(1)
where UW shows compensation of employees per unit of value added (= unit labor costs), UT shows net taxes on production per unit, UD shows depreciation and amortization per unit and UP shows net operating surplus per unit. The annual national accounts data allow for decomposing all 64 NACE sectors until 2021.
Calculation of necessary data for 2022
Since detailed national accounts data for 2022 were not yet available at the time of writing, we proxy the decomposition of gross value added for 2022 20 . To this end, we use the quarterly national accounts data that are available until the first quarter 2023. However, these data are less detailed, with a rougher sectoral breakdown (13 NACE sections) and just two income-related value added components, namely gross value added (VAi,t) and compensation of employees 21 (Wi,t). 22 In order to calculate the net operating surplus (NBUi,t) as a residual, we need to estimate net taxes on production (Ti,t) and depreciation and amortization (Di,t) for each of the 13 NACE sections.
Net taxes on production
For our assessment, we divide net taxes on production into short-time work subsidies (KASUBi,t), other crisis-related subsidies (SCSUBi,t) and net taxes on production without crisis-related subsidies (NPAEXCSUBi,t).
The breakdown of short-time work subsidies was derived from detailed data provided by the labor ministry. Other crisis-related subsidies include other pandemic-related subsidies (in particular net turnover compensation, fixed cost grants, compensation for losses) as well as energy bill subsidies in the context of the current crisis. We allocated short-time work subsidies to economic sectors (using data from the Austrian COVID-19 financing agency COFAG and the finance ministry) and made quarterly breakdowns (using aggregated Statistics Austria data). We allocated the energy bill subsidies provided for 2022 to the eligible economic sectors using input-output data for electricity and gas expenditure. We calculated net taxes on production without crisis-related subsidies 23 as follows: EU agricultural subsidies come as a separate aggregate in the quarterly nonfinancial sector accounts. As the remaining net taxes on production are relatively stable, we used the 2019 structure for allocating the data for 2022 across sectors, with the quarterly breakdown made in line with the aggregate’s development. See chart A2 in annex 3 for detailed quarterly figures for the individual components of net taxes on production.
Depreciation and amortization
The gross operating surplus remaining after net taxes on production include the net operating surplus and depreciation and amortization. Depreciation and amortization data are available from the annual national accounts up to 2021. To calculate the annual figures for 2022 and the forecasts for 2023 and 2024, we used the perpetual inventory method (see annex 2). As depreciation and amortization are driven by the replacement cost of capital, the most recent price increases lead to significantly higher depreciation and amortization from 2022 to 2024 than in previous years.
Net operating surplus
The net operating surplus is calculated as gross operating surplus less depreciation and amortization.
Compensation of employees and net operating surplus adjusted for crisis-related subsidies
The net operating surplus, including subsidies received less taxes paid on production, recorded in the national accounts constitutes accounting profits (as opposed to operating profit excluding subsidies). Apart from agricultural subsidies, subsidies are insignificant in normal times, since their share is low (2000–2019: 1.7% of gross value added) and stable over time. However, in 2020 and 2021, the share of crisis-related subsidies increased to 7.1%.
Since crisis-related subsidies do not impact enterprises’ price-setting behavior, operating profit is more relevant for our exercise as we seek to establish to what extent labor and capital have contributed to the price increases. Both short-time work subsidies (paid to enterprises, but essentially benefiting employees) as well as other crisis-related subsidies aim to prevent an increase in unemployment and/or corporate insolvencies, rather than seeking to reduce consumer prices.
Short-time work subsidies directly benefited labor. In many other countries, these subsidies were recorded in the national accounts as direct transfers to households, while in Austria they were recorded under subsidies and compensation of employees alike. Hence we deduct the subsidies from compensation of employees to increase international comparability.
Regarding the lavish support provided through the other COVID-19 subsidies (net turnover compensation, fixed cost grants, compensation for losses), we can assume that these subsidies primarily lowered losses or bolstered profits rather than leading to price cuts. Therefore, we deduct these subsidies directly from the net operating surplus, and the initial retroactive energy bill subsidy for 2022 as well.
Thus, we adjust both the net operating surplus and the compensation of employees for the respective crisis-related subsidies:
Chart 2 (left-hand panel) shows the result of these adjustments for the overall economy. In 2020, nominal (unadjusted) compensation of employees fell by 2%. If we subtract the short-time work subsidies employees received, their compensation would have fallen by 6%. Likewise, the other COVID-19 subsidies led to a significantly smaller decrease in net operating surplus (–4% instead of –14%). In 2021, unadjusted compensation of employees (+4%) rose less strongly than adjusted compensation of employees (+7%), owing to the decline in short-time work. Firms’ unadjusted net operating surplus including COVID-19 subsidies (+13%) rose more sharply than the adjusted one (+10%) due to the expansion of COVID-19 funding. Growth of the net operating surplus in 2022 was high (+13%) but distorted downward by the decrease in COVID-19 subsidies, and remained well below the growth of operating profits excluding subsidies (+25%).
Chart 2 (right-hand panel) also shows the unit costs relevant for the decomposition (= nominal value added component divided by real value added).