According to the latest results of the Ifo Investment Survey, gross fixed capital formation in western German manufacturing was almost 22% below the level of 2008. A similarly strong decline in investment was last witnessed in 1993.
Despite the slow recovery in business activity, the utilisation of production capacities due to weak demand in comparison to previous years – is still low, so that for the coming year no noticeable increase in investment propensity is expected. According to companies’ current plans for 2010, investments will rise only slightly: by nearly 2%. It will primarily be the large firms that will build up their investments in 2010, whereas the smaller firms have planned further cuts. However, should the economy clearly recover over the course of the coming year, it is certainly possible that the smaller firms, which are quite flexible in their investment behaviour, will revise their plans upwards.
In light of the currently low capacity utilisation, it is not surprising that the investment motive “expansion” has clearly lost importance, now being ranked in second place. The main motive of investment activity, both for this and next year, is for “replacements”.
For this survey, which was conducted in the fourth quarter of 2009, some 1,800 western German firms participated. Measured in terms of gross fixed capital formation, these firms represent 53% of the manufacturing industry in western German.
Presentation of survey results:
Annette Weichselberger, „Westdeutsche Industrie 2010: geringer Investitionsanstieg“, ifo Schnelldienst 62 (24), 2009, 78-82.
Western German Manufacturing: Slight Increase in Investment Ifo Investment Survey in Western German Manufacturing - Results of the Ifo Investiment Survey for Western Germany in Fall 2009 Document Size: 87kb
Legend: In connection with the Ifo Investment Survey in manufacturing and mining, carried out twice a year, the Ifo Institute collects data on investment trends in western and eastern Germany. The survey measures investment developments in the past, the investment plans for the current and comings year, and the motives of investment activity. Investment activity in eastern Germany is collected and evaluated separately because of the different industrial structures.
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