Buoyant industrial sentiment
Industrial sentiment has been remarkably upbeat for months now. A majority of
companies have been optimistic about their current situation since mid-2010. In
the last few months, expectations have considerably improved as well – a fact
which bodes well for the future. Managers are clearly cheerful about future
trends in business and production activity, exports and employment. This is
somewhat surprising, seeing that there are numerous economic and political
risks.
Moreover, industrial output growth of c. 3% is not particularly strong in
comparison to former upswings (such as the years 2004-2007).
Investment activity in Germany has picked up in line with stronger capacity
utilisation in the industry. Capacity utilisation has risen for six quarters in a row
now and was 3.5 pp above the long-term average at the beginning of Q4. In
fact, manufacturing capacity utilisation has reached its highest level since Q2
2008.
Against this background, the share of expansion projects in total
investments in machinery and equipment is likely to rise in the coming quarters.
This hypothesis is supported by a survey conducted by the Association of
German Chambers of Commerce and Industry (DIHK) in autumn 2017, which
showed that companies have recently invested increasingly in expanding their
capacities.
EU Forecast
euf:ba18h:146/nws-01