German Manufacturing: Companies Keener to Invest in 2017

The willingness of German manufacturers to invest remains below expectations. According to the latest responses to the ifo Investment Survey, manufacturers did increase their investments in 2016, but not to the extent that they originally planned. At a good 57 billion euros the nominal investment level was around 1% (real: +/-0%) above the 2015 level. According to manufacturers' original investment plans of autumn 2015, an increase of 5% was foreseen for 2016. Cautious investment activity in the vehicle and parts manufacturing branch, which alone accounts for almost a quarter of investment in manufacturing, is particularly noteworthy. Thanks to the clear economic recovery over the course of year, manufacturers' willingness to invest has grown markedly. According to their current plans, German manufacturers intend to increase their investment in new buildings and equipment by around 7% in 2017. This means that last autumn's overall investment plans have been upwardly revised. The main target of investment activity last year and in 2017 is capacity expansion, primarily with a view to expanding and/or changing the existing production programme. A secondary goal is replacement procurement, while the rationalisation incentive only plays a minor role on the whole.