Business managers in manufacturing industry expect their investments to remain almost stable in 2020Industrial 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%).
- For 2019, business managers have dampened their investment expectations
- For 2020, business managers expect almost stable investments overall
- The balance of opinion on expected investment has rebounded for the first half of 2020
- Investment is less fostered by demand and more by the financial environment
- Replacement of equipments remains the first purpose of investment
- For more information
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.
tableau Annual nominal change in investment in the manufacturing industry
|Nominal change in investments|
- Note: From 1998 to 2018, the evolution is the value ultimately declared; for 2019 and 2020 the evolution is the estimate from the current survey.
For 2019, business managers have dampened their investment expectations
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 almost stable investments overall
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.
tableau Estimate of the nominal annual investment growth in manufacturing industry by major sectorin %
|NA* : (A17) et [A38]||In 2019||In 2020|
|Forecast Jul.19||Forecast Oct.19||Forecast Oct.19|
|C :Manufacturing Industry||6||4||-1|
|(C1) Manufacture of food products and beverages||1||0||1|
|(C3) Electrical and electronic equipment ; machine equipment||12||5||0|
|(C4) Manufacture of transport equipment||14||11||2|
|[CL1] Motor vehicles||18||18||2|
|Total sectors C3 + C4 + C5||7||4||0|
- * The codes correspond to the level of aggregation (A17) and [A38] of the "NA" aggregate classification based on NAF rev.2.
- How to read this table: In the manufacturing industry, firms surveyed in October 2019 observed a 4 % increase in nominal investment in 2019 compared with 2018 and forecast a decrease of 1 % in 2020 compared with 2019.
- Source: INSEE – Industrial investment survey
The balance of opinion on expected investment has rebounded for the first half of 2020
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).
tableau Opinion of industrials regarding six-month change in investment (first estimate)
|Forecast for the following semester|
- Note: this graph illustrates the opinion balances of industrials surveyed for the first time on their expected investment for the following semester (April and October surveys)
Investment is less fostered by demand and more by the financial environment
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.
tableau Factors influencing investment decisions
|Average 1991-2019||In 2018 (observed in Oct.18)||In 2019 (observed in Oct.19)||In 2020 (prediction in Oct.19)|
|Expected profits from new investment||81||75||76||78|
|Overall financing conditions||15||32||37||38|
|Technical factors (1)||63||64||62||63|
|Other factors (such as tax incentives)||24||26||36||35|
- (1) Technological developments and need for labor to adjust to these new technologies
- For each factor, the balance of opinion is calculated as the difference between the percentage of stimulating answers and the percentage of limiting answers.
- Source: Industrial investment survey - INSEE
Replacement of equipments remains the first purpose of investment
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.
tableau Breakdown of the purpose of investment
|new production methods||7||6||5|
|Increase in productive capacity||16||16||16|
|Introduction of new products||13||13||12|
|Other puposes (safety, environment, working conditions…)||20||20||21|
- Source: INSEE – Industrial investment survey
Methodology 2017 (pdf, 147 Ko)