Alarming report

Austria’s economy will have to struggle for even longer

(Bild: Pcess609 - stock.adobe.com)

The domestic economy is still in recession. The threat of tariffs from the USA, Austria's second most important trading partner, is also depressing the mood.

Following a decline of one percent in 2023, economic output shrank by 1.2 percent in the previous year. Industrial production in particular continued to decline, according to the economic report by the Austrian Institute of Economic Research (Wifo). But expectations are also subdued. The situation looks better for the construction industry, tourism and trade.

In the fourth quarter of 2024, economic output fell by 0.4% compared to the previous period, slightly more than in the third quarter (-0.3%). Industrial production in the eurozone suffered from weak international demand. There are currently no signs of any significant improvement, noted Marcus Scheiblecker, author of the Wifo economic report. The latest company surveys indicate that the downward trend will merely slow down in the coming months.

First positive economic data, consumer confidence weakens
Austria's construction industry, on the other hand, is likely to have bottomed out. The more favorable interest rate environment and the expected easing of lending guidelines are creating better framework conditions here. Consumer demand also developed positively, with real retail sales picking up again in the second half of 2024. New car registrations have also risen sharply in recent months. However, this cannot hide the weakening consumer confidence, which is being weighed down by fears about their own jobs and the numerous company insolvencies. Tourism, on the other hand, has developed very positively: after a record number of overnight stays in the summer of the previous year, a new high is also expected for the current winter season.

Inflation picked up again
As expected, the inflation rate rose again at the start of the year as the electricity price brake expired. In addition, fossil fuels became more expensive and the euro weakened. After a price increase of 3.2% in January, inflation rose to 3.3% in February according to the flash estimate by Statistics Austria. Although the unemployment rate increased significantly compared to the previous year, it has stagnated in recent months. The number of employed persons increased in February compared to the previous month. However, this growth could not fully compensate for the jobs lost in January.