The recent survey of 2,500 enterprises in manufacturing, construction and public utilities conducted by the Austrian Institute of Economic Research in collaboration with the EU (Directorate-General II-4) reveals that enterprises in these sectors plan to invest substantially in 1996. The lively investment demand in some sectors, such as manufacturing, will not be strong enough to trigger a clear cyclical upturn; it will, however, help support the recovery in the second half of 1996. According to the WIFO forecast for the whole economy, investment in machinery and equipment will expand by 3.5 percent in real terms, while investment in construction will shrink by 1.5 percent. Total fixed investment will grow by only 0.6 percent, at a similar rate as GDP (+0.7%). Investment spending in manufacturing accounts for about 10 percent of total investment in Austria's economy. Last year investment outlays by manufacturing firms totaled ATS 50.6 billion, implying a real gain of 6.5 percent (7.2 percent in nominal terms) over 1994. These figures do not include the large foreign direct investment by Austrian manufacturing firms. The first half of 1996 was characterized by a cyclical downturn. Current economic trends indicate a continuation of the economic slack, with weak orders, too high inventories, expectations of a decline in prices, and low capacity utilization. In other European countries as well, weakness in demand and production persists. Business confidence in manufacturing in the EU continued to decline during the first five months of 1996. Only in Germany, Spain, and Luxembourg did enterprises report a slight improvement in the May survey. According to the Spring business climate survey by WIFO, the downswing is flattening out. Production expectations, the indicator with the largest lead, post a slight improvement, on a seasonally adjusted basis. Another positive sign is provided by the May investment survey which shows that manufacturing firms expect (nominal) sales to expand by 2.6 percent in 1996. Despite the modest growth prospects, enterprises in manufacturing are quite optimistic for 1996; they plan to expand investment by 28.6 percent to ATS 65.1 billion, a figure exceeding the record high of ATS 64.9 billion in 1991. This favorable development in investment activity in Austria's manufacturing is mainly due to several huge investment projects in the export sector, each worth some billions of schillings. The investment plans as recorded in the investment survey are likely to be based on the expectations of an upturn in the second half of 1996; if the phase of weak economic activity continues in Europe, however, part of the investment outlays are likely to be postponed. At present, construction firms are suffering badly from the recession in the construction industry. In 1995, spending on machinery and equipment was cut by 16.6 percent in nominal terms. A further reduction of 7 percent is envisaged for 1996. In 1995, electricity companies increased their capital outlays slightly (by 1.7 percent in nominal terms). For 1996, a vigorous expansion by 13.3 percent is envisaged. These optimistic investment plans have to be seen, however, in the light of the substantial downward revision that occurred in 1995. The expansion in investment activity concerns above all the construction of power plants of the regional utility companies and the construction of transmission lines.
Investitionen stützen die schwache Konjunktur. Ergebnisse des WIFO-Investitionstests vom Frühjahr 1996; Investment Outlays Support Economic Activity
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