Interview
INFLATION BECOMES A COMPETITION PROBLEM
FOR INDUSTRY
The downturn in domestic industry is slowly approaching its low point, as the Economic Compass of INDUSTRIEMAGAZIN and Syngroup suggests. But constantly higher inflation is becoming a competitive problem for domestic industry says Walter Woitsch, managing director of industrial consultancy Syngroup.
Your conclusion in the economic compass for September is that everything in the outlook currently stands and falls with demand, i.e. ultimately the purchasing power of working consumers. The mega-topic of the next few weeks will be the start of collective bargaining with the metalworkers' round. From the industry's point of view, won't that have to be a high conclusion?

Walter Woitsch: Yes, I have to take up the cudgels for industry. I think it will be important to find a moderate line here. Why? Even with all the productivity gains in industry, we still have a wage cost share of around 20 to 30%. And if we already have high wage agreements in the second year or perhaps in a subsequent year, this will have a dramatic effect on the overall cost development. I can already see clients approaching us today and saying, “With these increases, we will have a massive cost and competitive issue in 2025”.

If we look at inflation rates, Austria has been well above average since the end of last year. But above all, and this is almost more important, well above, above the values of Germany, an economy with which Austrian industry is very closely intertwined. What does this mean for competitiveness in Austria?

Walter Woitsch: You mentioned it. We have a very close interlocking. We are competing with our companies in their offers in the joint German companies, and if we have a shift here over a longer period of time or in favour of Germany in that sense, that will have a very, very dramatic effect on competitiveness from my point of view, because I say we cannot become even better here now than we actually already are. And therefore this imbalance must be balanced out somewhere, otherwise it will represent a real locational disadvantage in the medium term.

What can companies do to compensate for this locational disadvantage?

Walter Woitsch: Yes, what we are seeing is a renaissance of the issue of personnel productivity: on the one hand, we are seeing very high increases in the area of personnel costs, coupled with very moderate, moderate growth or declining volumes. Tendencies that lead to this. How can we find approaches here, whether it is in the area of digitalisation, that automation is always gaining very strong momentum, because there are many, even smaller solutions that can actually represent optimisation here. Or working with artificial intelligence data in connection with staff productivity.

Will that be enough to compensate for a competitive disadvantage?

Walter Woitsch: I say conditionally it will. We have shown time and again in the past that the industry is very, very proactive here. And it certainly manages to maintain a high level. Coupled with this, I still see that IT is monitoring the entire portfolio. That is, how can we optimise margins here, perhaps also reduce certain areas or withdraw from certain business areas because they are simply no longer presentable due to this changed volume situation? Economically, that means that there are shifts in the business portfolios of the various industrial companies.

Economic Compass Austria September 2023 by INDUSTRIEMAGAZIN and Syngroup
I have read through an analysis this month very carefully and I can hear slight optimism. What can you give us for an outlook?

Walter Woitsch: It’s getting better, we can see it. I think the outlook is good for these six months. This year it’s going to be expensive, we’ll be through it and then we’ll see each other again next month. Then we will look at it.

So your conclusion is: less pessimistic, but not entirely optimistic?

Walter Woitsch: I believe in a good medium-term perspective, yes.

Rudolf Loidl, Chefredakteur Industriemagazin
written by
Rudolf Loidl
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