According to results from the recent WIFO investment survey, which samples some 800 firms of the manufacturing sector, the construction sector and the energy sector as well as public transport enterprises and public utilities, capital formation will be weak in 2002. Companies plan to invest € 10.2 billion, which amounts to a slight decrease of 0.1 percent. The WIFO business cycle forecast of December 2001 anticipates investment in machinery and equipment by the whole economy to rise by only 0.3 percent in volume in 2002. Due to weak foreign demand, growth of the manufacturing sector was modest in 2001. Production increased by just 1.8 percent in real terms. The companies of our sample report an aggregate 3.3 percent rise in sales and expect a further gain of 3.4 percent for 2002, compared to 9.9 percent in 2000. However, the latest business survey of January 2002 suggests no further deterioration of the industrial cycle. Firms see their own business situation slightly more positive than they did at the end of 2001. Nevertheless, the percentage of firms expressing optimistic expectations remains far below the long-term average. In other EU countries, the industrial business climate is still weak. The relevant confidence indicator for the whole area, which has been falling for 18 months, decreased by 2 points in November 2001, after –4 to –5 points in October. After a jump in industrial investment in 2000 by +16 percent in value terms according to the latest survey, industrial firms envisage increasing their capital spending by a nominal 9.3 percent (to a level of € 7.47 billion) in 2001, corresponding to a price-adjusted gain of 9.1 percent. Investment activity is mainly driven by the motor vehicles and investment goods industries which plan for a nominal increase of 48.8 percent and 46.7 percent, respectively. Compared to the last spring survey of 2001, firms in the investment goods industries have made upward revisions of their plans, due to a number of large-scale projects. Investment may have also risen in the durable consumer goods and the food products industries. The construction industry experienced a remarkable output decline by 3 percent in 2001. As a consequence of the persistent weakness in construction demand, investment in machinery and equipment has fallen by an estimated 5.0 percent following a 4.6 percent decrease in 2000. With construction activity set to remain sluggish in 2002, investment in machinery and equipment is expected to drop by another 6.0 percent. Following up on the trend of the past years, the electricity industry heavily reduced investment spending in 2001, by 24.8 percent to a total of € 548 million (preliminary figure). A modest rise (by 8.6 percent to a level of € 595 million) is expected for 2002. Transport firms and public utilities plan to cut their investments by 18.0 percent in 2002.
