Retailing: Clear revival of investment activity in 2006

After a slight decline in aggregate investment activity in the German economy last year, growth in investment is expected for 2006. The investment hesitancy in German retailing is also about to end, according to a special survey by the Ifo Institute. In addition to a clear recovery in equipment investment, a slight revival of construction activity is also expected. Retailers have profited this year from the positive effects of the World Cup and by the advance purchases of durable consumer goods in anticipation of the rise in VAT next year. Retail sales in 2006 will thus increase more strongly than last year. The Ifo survey indicates that especially the larger retail enterprises will profit most from the gradual revival of private consumption. They are also are responsible for the recovery of investment activity, whereas the situation for many smaller enterprises, particularly in eastern Germany, remains difficult.