5 November 2020

2020- n° 285

Business managers in manufacturing industry have forecast a rather weak recovery in investment in 2021 after a strong fall in 2020 Industrial investment survey - October 2020

The business managers in industry surveyed in October 2020 have estimated their investment to have fallen by 14% in nominal terms in 2020 compared to 2019. Thus, they have lowered their July estimate by three points, as in average at this time of the year. For the year 2021, business managers have forecast a rather weak recovery in their investment expenditures, with a 4% rise in nominal terms, with a mixed picture among sectors. Investment should bounce back strongly in the agri-food industry and in the electrical, electronic and machine equipment sector but more moderately in the manufacturing sector for other goods; it should further shrink in the transport equipment sector.

With an overall decrease of 14% in investment expected for 2020, business managers have lowered by 3 points their April 2020 estimate, as usual at this time of the year from 2004 to 2019.

All sectors put together, industrialists are expecting a rather timid recovery in investment in 2021, with only a 4% growth in nominal terms. But at the sectoral level, the picture is very contrasted.

In 2021, investment should recover its 2019 level in the agri-food industry (+7% growth expected in 2021 after −7% in 2020) and in the electrical, electronic and machine equipment sector (+10% expected in 2021 after −7% in 2020). However, the investment of the transport equipment sector should decrease again in 2021 (−2% after −24%), and the investment of the “other manufacturing” sector – textile, chemicals, pharma, metal work, and so on – should bounce back only weakly (+3% after −13%).

The business managers will revise their expectations for 2021 over the next quarters; on average since 2003, the first forecast issued in October has been 0.5 points lower than the value ultimately declared two and a half years later in July.

For the second half of 2020, more business managers in industry have reported a rise rather than a fall in their investment as compared to the first half of 2020. The balance of opinion related to the forecasted change in investment in the ongoing half-year has rallied at +7 after –9 in the April survey, and has returned above its long-term average (+4).

Business leaders have been as numerous to anticipate a rise as a fall in their investment for the first half of 2021. The balance of opinion related to the expected investment in the following half-year has recovered to 0 after –9 but remains well below its long-term average (+7).

According to business managers, the 2020 situation has been less favourable to investment than the 2019 one in almost every aspect. First, the demand outlook has fostered investment even less than the previous year: the balance of opinion on the influence of the domestic-demand outlook on investment has lost three points from 2019 to 2020 and has moved away from its average. The fall is even sharper for the foreign-demand outlook. Second, financial conditions have spurred investment less: the balances of opinion related to the influence of indebtedness and of the overall financing conditions have shed nine points each, although remaining above their respective average. However, industrialists have deemed the “other factors” (such as tax incentives) to be as beneficial to investment in 2020 as in 2019.

In 2021, the demand outlook should encourage industrialists to invest more than in 2020 and even than in 2019: the balance of opinion on the influence of the domestic-demand prospects has risen by six points, but remains below its long-term average. Furthermore, the overall financing conditions should be more suitable to investment than in 2020 – the related balance of opinion has increased by four points – but less than in 2019. Likewise, the balance on the influence of indebtedness has recovered slightly in 2021, but stays below its 2019 level. Finally, the balance on the influence of “other factors” (such as tax incentives) has risen by five points from 2020 to 2021 and has reached its highest value since this series was created in 1992.