The Austrian economy still shows no clear signs of a lasting recovery. Production continues to shrink, with growth seen only in public and publicly affiliated services, according to the latest economic report from the Austrian Institute of Economic Research (Wifo).

Despite a slight recent improvement in business sentiment, pessimism remains dominant, says Wifo economist Stefan Schiman-Vukan.

A mix of economic policies has pushed electricity prices up by roughly one-third since the start of the year, and combined with typically higher price increases in services, this has resulted in inflation rates surpassing those of the eurozone, Vienna Online reports.

The fragile economy is reflected in the labour market, where unemployment is rising and both job vacancies and private sector employment are falling.

However, on a positive note, employment has increased somewhat due to the gradual rise in the retirement age for women starting in 2024.

According to Wifo, unemployment and displacement effects tend to be low during periods of labour shortages. The unemployment rate among women over 60 has matched the average for all women and remains notably lower than that of men in the same age group.

Globally, the situation varies. In the US, a sharp rise in tariffs on EU imports is weighing on economic growth and fuelling inflation. Despite the slowdown, interest rates remain high.

Meanwhile, in China, excess production and pressure on the real estate market are pushing prices down, although a trade surplus continues to support economic growth.

Whereas in the eurozone, the economy remained mostly steady during the first half of the year. Unemployment stayed low, and inflation aligned with the European Central Bank’s target. Wifo notes that the key interest rate has reached a neutral level and has not been lowered further recently.

Schiman-Vukan highlighted that increasing the retirement age is an effective measure to boost employment: “In times of labour shortages, displacement effects are low,” said the Wifo economist.

The improvement in the labour market for older workers serves as a crucial stabilising factor amid the broader economic weakness.

“Anyone who wants people to work longer must first and foremost provide them with the jobs to do so,” said Ines Stilling, Head of Social Affairs at the Chamber of Labor (AK). “It is necessary for people to remain healthy until retirement. Everything else is a pseudo-debate. An increase in the statutory retirement age means longer unemployment or illness for many, because even now, two-thirds of companies do not hire people over 60.”