Manufacturing (Germany):
Somewhat less friendly business climate

The enterprises in manufacturing evaluated their current business situation a little less positively than in the previous month; for manufacturers of consumer dur-ables it remained stable. Demand and production increased again; order backlogs remained clearly above normal levels. Reports of excess inventories were infre-quent. In the course of the fourth quarter the capacity utilisation rate increased to 87.6%, surpassing the comparable previous year value by three percentage points. Also the range of order backlogs increased (3.0 production months). Opti-mism regarding the business outlook weakened slightly, also with regard to future export business. According to the appraisals of the enterprises, their competitive-ness on foreign markets both within and outside of the EU has improved, how-ever. Production plans are increasingly expansive, and also the willingness to em-ploy additional workers has increased. According to the survey responses, price increases will continue, especially for intermediate products and durable con-sumer goods. In eastern Germany the business situation in manufacturing deteriorated clearly, but positive assessments are still dominant. Capacity utilisation at 86.3% was higher than in September (December 2005: 82.4%); on the other hand, the range of order reserves shortened somewhat (2.3 months). The survey participants ap-praised their business outlook with increased confidence and plan to expand pro-duction. The level of employment should continue to improve.