Modest Increase in Investment Expenditures in 1998. Results of the Investment Survey from Autumn 1997
In its recent investment survey WIFO asked approximately 2,500 firms of the manufacturing sector, the construction sector and the energy sector for their planned and realized investment expenditures, their sales and their business expectations. For 1997 firms report an increase in investment by 4.4 percent. A somewhat smaller increase, 1.9 percent, is planned for this year. For the whole economy, WIFO predicts an increase in real gross fixed investment by 3.6 percent for 1998. This figure corresponds to the improving business climate expected for this year. The upswing of the manufacturing business cycle continues and is spreading to more and more industries. As fiscal policy twins less restrictive, domestic demand is becoming stronger. As a result of the favorable development of the exchange rate of the schilling as well as of the drop in labor unit costs Austrian manufacturing was able to increase its competitive position in foreign markets; this led to a pronounced increase in exports in 1997. So far foreign demand has been the main source of the improvement in the domestic business climate. In 1998 domestic demand is again expected to gain momentum. This should favor the sectors mainly dependent on domestic demand like the producers of traditional consumer goods and some of the sectors linked to the construction industry. Austrian manufacturing invested heavily in recent years; in 1996 a series of large investment projects in the paper industry and in the transport equipment industry (suppliers of car components) was undertaken. In some other sectors, increased competition arising from the liberalization of Eastern Europe and European integration induced firms to spend heavily on restructuring and rationalization. The large investment volume of 1996 will also be achieved in 1997 although investment plans have been slightly revised downwards. In 1998 total industry investment is expected to rise modestly by 0.2 percent in real terms. The new ÖNACE classification which also includes smaller firms and covers far more firms than the classification (Fachverbände) used until 1995, records higher growth rates for manufacturing investment. In 1997, investment increased by 8.2 percent in nominal terms. A growth rate of 9.3 percent is forecast for 1998. Note that this figure is more in line with the dynamics of the overall business cycle. In 1998 investment will be most dynamic in the chemical industries, in consumer good industries and in industries related to the construction sectors. Basic industries, especially the paper industry, have abandoned or postponed some big investment projects and are expected to reduce their investments by 17.3 percent. Producers of technical products, most importantly the transport equipment industry, will likewise reduce their investments in 1998. Due to sluggish demand in the construction sector construction firms reported a reduction in their original investment plans for 1997. Their investment in machinery and equipment probably increased by 1.5 percent in 1997 after a 5 percent increase in 1996 and a decrease by 31 percent in 1995. Since a significant upturn in construction demand cannot be expected for 1998 despite a favorable overall business climate, investment will remain sluggish in 1998. Firms report pessimistic expectations and plan to increase real investment expenditures by 1.5 percent. The electricity industry is also an important sector with high investment intensity. The original investment plans for 1997 proved too optimistic and have been corrected downwards considerably. Nevertheless, an increase by 19.6 percent for 1997 has to be expected. Since several big investment projects have been finished last year, this year's investment will be probably reduced by 1.5 percent. The "Verbundkonzern", Austria's largest electricity producer, plans to reduce its investment outlays considerably.
Investitionen der Industrie nehmen 1998 kaum zu. Ergebnisse des WIFO-Investitionstests vom Herbst 1997; Modest Increase in Investment Expenditures in 1998. Results of the Investment Survey from Autumn 1997
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