Record-breaking Inflation Rate Hits May 2024 Levels; Unemployment Rises to 7.8%
In a recent announcement, Austria's Minister of Labour and Social Affairs, Korinna Schumann, revealed a 40 million euro increase in the AMS funding budget for 2025, aiming to address the rising unemployment rates in the country. However, the unemployment situation in Austria remains concerning, as the number of unemployed individuals has increased by 7.8 percent compared to the previous year, reaching 364,419 people in June 2025.
The unemployment rate has also risen by 0.5 percentage points to 6.8 percent, marking a significant increase since April 2023. Particularly hard hit by the rise in unemployment were the manufacturing sector and the federal states of Upper Austria and Salzburg.
The inflation rate in June 2025 was the highest since May 2024, standing at 3.3 percent. This upward trend was primarily driven by several key factors. The energy sector, notably fuel, saw a notable price increase of about 3.5 percent, exerting a stronger inflationary effect compared to previous months.
Food, tobacco, and alcohol categories also experienced a dynamic price development with an increase of around 4.4 percent, indicating significant upward pressure on consumer costs in these sectors. Services prices grew at a near-constant but strong rate of 4.3 percent, having the largest impact on overall inflation. This suggests that sectors such as housing, utilities, or other services maintained steady price increases contributing heavily to inflation.
Industrial goods prices rose more modestly by approximately 0.9 percent, indicating mild inflationary pressure relative to other sectors. Combining industrial goods and services, core inflation stood at 3.1 percent, underscoring the combined contribution of these sectors to the higher inflation.
Economists from IHS and Wifo have revised their forecast for Austria's economy upwards and no longer expect a third recession year this year. Despite this positive outlook, the country's economy is still stagnating, according to the head of the Public Employment Service (AMS), Johannes Kopf, who commented that employment is still decreasing. The number of dependent employment relationships for June 2025 was provisionally estimated at 3,982,000, which is 5,000 less than in June 2024.
In conclusion, the energy sector, food/tobacco/alcohol price increases, and persistent service sector inflation are the primary drivers pushing Austria's inflation rate to 3.3 percent in June 2025. Industrial goods contribute as well but to a lesser extent. This reflects broad-based inflationary pressures with energy and services playing leading roles. The increased funding for AMS and the positive economic outlook offer some hope for addressing these challenges in the coming months.
[1] Source: Statistik Austria (Statistics Austria)
The increase in the AMS funding budget for 2025, totaling 40 million euros, could potentially be allocated to address the rising unemployment rates in Austria, given the general-news of the concerning unemployment situation in the country.
Despite the positive outlook for Austria's economy, the finance sector might also need to consider the impact of the rising unemployment rates on the general economy, particularly as the unemployment rate has increased to 6.8 percent this year.
