This is really what our industry is doing right now

This is really what our industry is doing right now

The outlook for the global economy continues to deteriorate. The World Bank and the International Monetary Fund (IMF) have already lowered their forecasts for global growth. The reason: In addition to the Covid pandemic, there is now an additional crisis with the war in Ukraine, which is also putting a strain on the economy. But how are the automotive technicians doing? 

According to the World Bank, the global economy will grow almost one percentage point less this year than originally expected due to the war in Ukraine. World Bank President David Malpass recently said an increase of 3.2 percent is now expected. The World Bank previously assumed 4.1 percent.

IMF chief Kristalina Georgieva had already caused another disruption in the meeting before she lowered her forecast by emphasizing that for the first time in many years inflation had become a “clear and present danger for many countries around the world”. “This is a massive setback for the global economy,” said the IMF chief. The global economy had already lost momentum before the Russian attack on Ukraine. In January, the IMF estimated global growth for 2022 at 4.4 percent. “Since then,” says Georgieva, “the outlook has deteriorated substantially.” Its chief economist Pierre-Olivier Gourinchas now stressed: “The outlook for the global economy has suffered a severe setback, largely because of Russia’s invasion of Ukraine.” In its new forecast, the IMF only expects global growth of 3.6 percent this year. That is 0.8 percentage points less than assumed in January. For the euro zone, the IMF expects growth to be 1.1 percentage points lower, at 2.8 percent. 

The Russian economy is expected to contract by 8.5 percent this year, according to the IMF forecast, a downgrade of 11.3 percentage points from January. The World Bank expects an even deeper recession. The IMF is expecting a dramatic recession for Ukraine - the economy is expected to shrink by 35 percent because of the war. 

The inflation rate is expected to remain high for longer than previously assumed, mainly because of the war. This year, the IMF expects an inflation rate of 5.7 percent in the industrialized countries, i.e. 1.8 percentage points more than assumed in January. In emerging and developing countries, the inflation rate is expected to average 8.7 percent, an increase of 2.8 percentage points.

Meanwhile, KMU Research Austria has published the current economic observation for trade and crafts carried out on behalf of the Austrian Chamber of Commerce. The automotive industry is of course particularly interested in the situation among automotive technicians (including vulcanizers).

And this shows that the industry as a whole got through 2021 quite well. 47 percent of companies reported increases in sales for 2021 compared to 2020 - by an average of 15.7 percent. At 30 percent of the companies, sales remained at the previous year's level and 23 percent recorded a decline in sales (by an average of 9.2 percent).

Compared to the previous year, this results in an industry average increase in nominal sales of 4.0 percent. The development was therefore better than in the previous year. In comparison, Austria's total economic output (gross domestic product) grew more strongly in nominal terms, at 6.3 percent.

65 percent of the companies were able or had to increase sales prices in 2021 compared to 2020, and not a single company had to reduce prices. On average in the industry, sales prices increased by 3.6 percent in 2021. Overall consumer prices rose by 2.8% (inflation rate) in 2021. After taking into account the change in sales prices, industry sales increased by 0.4 percent in terms of volume. For comparison: the real gross domestic product was 4.5 percent higher than the previous year.

Meanwhile, the industry has also invested diligently. In 2021, 57 percent of companies made investments. The majority of investments were expansion investments (44 percent), 41 percent were replacement investments and 15 percent were rationalization investments.

On average, around 4,100 euros were invested per employee in 2021, which is 101 percent more than in the previous year (2,000 euros), in which there were, of course, crisis-related declines in investments. Of the total investments, 2,700 euros per employee went to construction (2020: 900 euros) and 1,400 euros to other (equipment) investments (2020: 1,100 euros).

32 percent of companies plan to make investments in 2022. And what are the biggest challenges for 2022? In the current year, 66 percent of companies are affected in their business activities by supplier or supply chain problems, 59 percent by bureaucracy and administration, 54 percent by price increases for raw materials and materials, 49 percent by price increases for energy, 48 percent by taxes and duties, 42 percent by a shortage of skilled workers, 18 percent by price competition and 11 percent by a shortage of apprentices.

In the first quarter of 2022, 11 percent of the companies assessed the business situation as “good” (previous year: 2%), 55 percent as “seasonal” (previous year: 44%) and 34 percent of the companies as “poor” (previous year: 54%). On balance (proportion of companies with good minus bad reviews), companies with a poor business situation outnumber companies by 23 percentage points. Compared to the previous quarter, the mood barometer has fallen, as SME Research Austria notes.

24 percent of companies reported increases in sales in the first quarter of 2022 compared to the first quarter of 2021 (previous year: 5%). 48 percent recorded no change (previous year: 33%) and 28 percent suffered a decline in sales (previous year: 62%). On balance, the companies with a decline in sales of 4 percentage points predominate. However, the situation is better than in the comparable quarter of the previous year.

Sales expectations for the second quarter of 2022 are consistently cautious: 21 percent of companies expect sales to increase compared to the second quarter of 2021 (in the previous year it was 38%), 56 percent expect no change and 23 percent expect declines (previous year: 27%).

On balance, the pessimistic assessments predominate by 2 percentage points, but the negative balance is below the level of the previous year (back then it was 11 percentage points).

For the period April to June 2022, 21 percent of companies intend to increase the number of employees, 67 percent want to keep the number of employees at least constant and 12 percent plan to reduce the number of employees. “On average, this results in a planned increase in the number of employees by 1.3 percent,” analyzes SME Research Austria.