German Companies Plan to Cut Investment in 2024
Companies in Germany have revised their investment plans for the current year downward. The ifo investment expectations fell to -0.1 points in March, down from +1.2 points in November. “Global demand for capital goods and intermediate goods remains weak and uncertainties persist regarding economic policy. As a result, many companies are postponing their investment decisions,” says Lara Zarges, economic expert at the ifo Institute.
Manufacturing companies cut their investment plans the most. Investment expectations there fell from 6.6 points in November to 1.4 points in March. “Especially in energy-intensive industries, the share of companies planning to reduce their investments is higher than the share planning to expand,” Zarges says. The indicator here fell from +3.7 points in November to -3.1 points in March. Expectations in the chemical industry took a major plunge from 16.4 points to 3.1 points.
In non-energy-intensive industries, there are still more companies planning to expand their investments than to reduce them. However, their investment expectations for 2024 also fell – from 11.2 points in November to 4.7 points in March. The reason is a strikingly strong correction among automakers, which slashed their investment expectations for 2024 from 34.0 points in November to just 1.3 points in March. “Nonetheless, there is a small ray of hope from manufacturers of machinery and equipment,” Zarges says. Their investment expectations rose from -2.0 points in November to 7.5 points in March.
Trading companies remain the most pessimistic for 2024. Even though their investment expectations rose from -14.6 points to -13.3 points, these companies still intend to reduce their investments on balance. Service providers also increased their plans for the current year somewhat, with investment expectations edging upward from +2.3 points to +2.5 points.
The points for the ifo investment expectations indicate the percentage of companies that intend to increase their investments on balance. The balance is obtained by subtracting the percentage of companies that want to reduce their investments from the percentage of those that want to increase their investments. If all the companies surveyed intended to increase their investments, the balance would be +100 points. If they all wanted to reduce their investments, it would be -100. The ifo Institute does not ask about the amount of planned investments.
