Austria’s economy shrank in the first quarter

This is mainly due to developments in industry and wholesale trade, as Statistics Austria announced on Monday. Compared to previous quarters, the decline in economic output was less pronounced. Due to population growth, GDP per capita fell by 1.7 percent compared to the previous year.

In the fourth quarter of the previous year, GDP was still down by 1.6 percent, after declines of 2.0 percent and 1.7 percent in the two previous quarters. The areas of manufacturing (minus 5.9 percent) and trade and in particular wholesale trade (minus 4.8 percent) had a dampening effect on development in the first three months of 2024. But economic services such as temporary employment also showed a decline of 2 percent.

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Construction industry records plus

The manufacturing sector has been recording a drop in sales month after month since March 2023, as Statistics Austria Director General Tobias Thomas explained to journalists. However, the decline in April was somewhat more moderate at minus 2 percent. While sales in industry fell by 2.6 percent, construction recorded an increase of 1.8 percent compared to April of the previous year.

The economy, however, was supported by accommodation and gastronomy: This sector recorded slight growth of 0.7 percent for the first time after the Corona catch-up effects and the subsequent inflation-related decline. In the 2023/24 winter season, overnight stays rose by 2.6 percent and the number of guests by 5.5 percent.

Exports also developed positively: while imports fell by 13 percent in January and February compared to the same period last year, exports rose by 3.1 percent. Compared to pre-coronavirus levels, imports were 16.3 percent higher in February this year and exports were 28.5 percent higher.

Inflation fell to 3.5 percent in April and 3.3 percent in May. Even though the trend is positive, Austria still has the fifth highest inflation rate in the EU. However, restaurants and hotels are among the drivers of inflation in Austria. In April, prices for catering rose by 7.9 percent and for accommodation by 5.9 percent year-on-year. A schnitzel cost 7.7 percent more in April than a year earlier, and wine prices rose by 7.5 percent. And tourism accounts for a much larger share of the consumer price index in this country than in other countries.

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In April, people had to pay 3.2 percent more for housing, water and energy than a year earlier. Existing rents rose by 7.7 percent, and new rents by as much as 10.3 percent. In contrast, district heating prices fell by 16.3 percent, natural gas by 13.1 percent and solid fuels by 16.7 percent. The inflation rate for various goods and services was 5.4 percent – insurance prices rose by 7.5 percent, and personal care costs increased by 4.1 percent.

While energy and food contributed 0.5 percentage points to inflation in April, core inflation (services and goods) accounted for 3 percentage points.