7 November 2019

2019- n° 289

Business managers in manufacturing industry expect their investments to remain almost stable in 2020 Industrial investment survey - October 2019

The business managers in industry surveyed in October 2019 stated to have increased their investment by 4% in nominal terms in 2019. Thus they have lowered by 2 points the estimate given last July; this downward revision is near the average revision at this time of year. For 2020, the business leaders in industry expect their investment spendings to remain almost stable (–1%). This first estimate for 2020 is lower than the first estimate for 2019 given in the October 2018 survey. However it is close to the first estimate for 2018, given in the October 2017 survey.

With an overall increase of 4% in investment forecasted for 2019, business managers have lowered their July 2019 estimate by 2 points, as usual at this time of year.

In 2019, investment is expected to slow down in the sector of electrical, electronic and machine equipment (+5% after +8% in 2018), in the agri-food industry (0% after +1%) and in the “other manufacturing” sector (+2% after +3%). Conversely, investment should rebound strongly in the transport equipment sector (+11% after -5% in 2018).

For 2020, business managers expect their investment spendings to remain almost stable (-1%) compared with 2019. Investment of the electrical, electronic and machine equipment sector and of the transport equipment sector should strongly slow down. It should falter in the “other manufacturing” sector.

The business managers estimate for 2020 will most likely be revised over the next quarters. On average since 2003, the forecast issued in October has been 4 points lower than the value declared in January of the following year. Nevertheless it is close, albeit slightly lower over the last few years, to the final estimate given in July two years later.

The balance of opinion related to the change in investment for the current half-year has sharply fallen, from +17 for H1 2019 to +8 for H2 2019. However, the balance of opinion on expected investment stands slightly higher for the first semester of 2020 than for the second semester of 2019 (+6 against +4).

Business managers have significantly changed their opinion on the influence of investment factors between 2018 and 2019. The domestic-demand and foreign-demand prospects foster investment much less now than they used to a year ago: the related balances of opinion have lost about 15 points. The balances on the influence of technical factors and of cash flows have diminished at a much slower pace, by 1 or 2 points compared to 2018.

By contrast, managers declare that the interest rates, the overall financing conditions and their indebtedness have disposed them to invest more than the year before: the related balances of opinion gain between 5 and 9 points.

Besides, other factors (such as tax incentives) have played a role in 2019 according to managers: the corresponding balance of opinion have jumped by 10 points between 2018 and 2019. It was probably bolstered by the transitory addition of the tax credit for competitiveness and employment (“CICE”) on wages paid in 2018 and of its being turned into a permanent exemption from employer contributions.

At last, managers expect similar investment factors for 2020 to those observed in 2019, with a slightly more positive role of foreign-demand and expected profits.

In 2020 the share of investments dedicated to the replacement of equipments should remain that of 2019. About a fifth of all investments are set to be used to modernize equipment; the share aimed at sparing energy should stay above its long-term average, unlike the share of investments meant to automatize processes. The share of investments aimed at extending the productive capacity of existing products is likely to stay at its average. At last, the share of investment devoted to introducing new products should lose one point from 2019 to 2020.