Western German Industry: Investment activity reviving again

According to the results of the latest Ifo Investment Survey, manufacturing firms in western Germany reduced their investments in 2005 over the previous year by 3% or €37. Also in eastern Germany, investments in manufacturing decreased perceptibly in 2005. According to the recently published results of the Ifo Investment Survey conducted in eastern Germany, manufacturers' investments for new plant and equipment were nominally around 14½% (real: 14%) below the level of 2004. As a whole, the manufacturing industry in Germany cut its spending on new plant and equipment by a good 5% (real: nearly -5 %). After four years of declining investment activity, there are now many indications that investments in western German manufacturing will pick up. The enterprises in western German manufacturing plan to invest ca. 9% more in new plant and equipment in 2006 than in 2005, according to the latest results of the Ifo Investment. Also in eastern Germany an increase in industrial investments is expected this year. According to the initial investment plans reported within the framework of the Ifo Investment Survey, the enterprises will increase their spending on new plant and equipment in eastern Germany by ca. 12% nominally (real: just barely 13 %). In total an increase in investments in Germany manufacturing of nominally 9% (real: 10%) is expected. As in past years the enterprises plan to invest more in expansion, less with the intention of increasing the capacity of the existing production programme but instead to enlarge the product range. In second place stood "replacement" as an investment motive. "Rationalisation" as a motive has weakened in recent years; only one in six western German manufacturers gave this as a main reason for investing.