Austria has managed to control its hyperinflation, with the inflation rate now approaching the eurozone average in recent months.

However, according to the Austrian Institute of Economic Research (WIFO), business sentiment in the country continues to be “extremely pessimistic.”

Elevated inflation, fuelled by “buoyant demand for leisure and tourism services, fiscal policy measures and strong wage increases,” has driven Austria's inflation rate to one of the highest in the eurozone in recent years. 

The WIFO report shows that Austria's inflation rate has moved closer to the eurozone average, with the difference edging down from 2.8 percentage points in December 2023 to just 0.3 percentage points in July 2024.

In addition, a flash estimate by Statistics Austria reveals that at the end of last month, the country’s inflation rate is forecast to stand at 2.9%, the first time the monthly figure has eased below 3% in three years, Xinhua news agency reports.

Nevertheless, “the cumulative rise in consumer prices (in Austria) in recent years has been much stronger than in the euro area,” stated Stefan Schiman-Vukan, who authored the WIFO report.

The report noted that, despite the fall in inflation, sentiment among domestic companies, especially in the manufacturing sector, remains very gloomy.

“Capacity utilisation in industry has been low for a year now. More and more companies are seeing a deterioration in their competitive position, especially on foreign markets,” the report added.

Moreover, according to a preliminary estimate by WIFO from late July, the country’s economy stagnated Q2 this year, primarily due to underperformance in the industry and construction sectors. 

The GDP for the second quarter experienced no real growth compared to the previous quarter, marking “the eighth quarter in a row with weak overall economic momentum or a decline” for Austria.