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Weaker Investment Expectations Another Negative Signal For Growth

GERMANY

November ifo investment expectations for the current year printed considerably lower (2.2 points vs 14.7 prior) compared to March (last publishing date) in data released this week.

  • For planned 2024 investment, the balance stands at positive 1.2 points - where a value of 0 corresponds to the number of companies wanting to increase their investments being equal to the number of companies planning to decrease their investments.
  • Ifo points out key factors as being "higher financing costs, weak demand, and uncertainty regarding economic policy".
  • The trade sector is the most pessimistic, with expectations falling from 3.7 to -3.5 for 2023, and -14.6 for 2024. For services, investment expectations declined sharply from 13.6 to 1.0 points but stayed positive for 2023 and 2024, 2024 expectations at 2.3.
  • The manufacturing sector plans to increase investment the most: the 2023 balance stands at 6.8 points. But that is down from 21.4, with the clearest decline against March seen in energy-intensive firms, particularly chemical production (13.9 to -15.6). For 2024, the expectations balance is 6.6 points in the manufacturing sector.
  • Automotive manufacturers are planning large investment regardless of weak economic conditions, with a 2024 balance of 34.0 points.
  • While business investment hasn't been strong in the past two years, it has positively contributed to GDP (0.1pp in each of the last 3 quarters) amid otherwise poor domestic demand. This Ifo survey correctly identified the flip from a drag in 2021 to more positive contributions in 2022-23, and as such bodes poorly for fixed investment growth in 2024.

ifo Business Survey

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November ifo investment expectations for the current year printed considerably lower (2.2 points vs 14.7 prior) compared to March (last publishing date) in data released this week.

  • For planned 2024 investment, the balance stands at positive 1.2 points - where a value of 0 corresponds to the number of companies wanting to increase their investments being equal to the number of companies planning to decrease their investments.
  • Ifo points out key factors as being "higher financing costs, weak demand, and uncertainty regarding economic policy".
  • The trade sector is the most pessimistic, with expectations falling from 3.7 to -3.5 for 2023, and -14.6 for 2024. For services, investment expectations declined sharply from 13.6 to 1.0 points but stayed positive for 2023 and 2024, 2024 expectations at 2.3.
  • The manufacturing sector plans to increase investment the most: the 2023 balance stands at 6.8 points. But that is down from 21.4, with the clearest decline against March seen in energy-intensive firms, particularly chemical production (13.9 to -15.6). For 2024, the expectations balance is 6.6 points in the manufacturing sector.
  • Automotive manufacturers are planning large investment regardless of weak economic conditions, with a 2024 balance of 34.0 points.
  • While business investment hasn't been strong in the past two years, it has positively contributed to GDP (0.1pp in each of the last 3 quarters) amid otherwise poor domestic demand. This Ifo survey correctly identified the flip from a drag in 2021 to more positive contributions in 2022-23, and as such bodes poorly for fixed investment growth in 2024.

ifo Business Survey