10 November 2009

2009- n° 291

According to business managers, investment in manufacturing industry would decrease in 2009 and, less markedly, in 2010 Industrial investment survey - October 2009

Surveyed in October 2009, business managers always forecast a drop in the investment for 2009: –24% in manufacturing industry and –22% in the industry as a whole. The decrease in investment would be especially sharp in the intermediate goods industry (–33%). The decrease would be less strong in the consumer-goods (–13%) and capital goods (–11%) industries.

In comparison with the July 2009 survey, business leaders’ expectations were revised 1 point downwards for the manufacturing industry and the industry as a whole.

Surveyed for the first time on their investment’s estimates for 2010, business leaders forecast a decrease in their equipment expenditures. Yet, this decrease would be more moderate than in 2009: –5% in manufacturing industry and –3% in industry as a whole. In manufacturing industry, investment is expected to decrease in the intermediate goods industry (–11%), while it would stabilize in consumer-goods and capital goods industries.

Between H1 and H2 2009 investment should decrease in manufacturing industry, according to business managers. This decrease is however less strong than anticipated in the April 2009 survey.

In H1 2010, business managers still anticipate a decrease in their equipment expenditures comparatively to the previous half-year.

According to the business managers of manufacturing industry, half of their investment would be aimed at maintenance of their productive capacity in 2010 : 28% for replacement (+1 point compared to 2009), 22% for investment connected with safety, environnement, working conditions (same as in 2009). On the contrary, a fewer proportion of investment would be allocated to increase the productive capacity: 14% in 2009 and 13% in 2010.

Business managers indicate that the factors influencing their investment decision will not improve much in 2010.

For example, domestic-demand outlook and foreign-demand outlook stay largely under their long-term average.

Moreover, the financial situation of industrial firms seems more and more unfavorable: balances of opinion concerning the cash flow and the indebtness sharply deteriorated. Yet, business leaders’ opinion about overall financing conditions and interest rates improved.

The investment revision indicator is still negative in October, although far less than the indicator calculated in April. Based on investment amounts filled in at each survey, this indicator is well-correlated with quarterly growth of gross fixed capital formation of non-financial enterprises. That suggests that investment will decrease at the end of 2009.