OREANDA-NEWS. December 19, 2012. The investment activity of German enterprises is directly reflecting the weak economic environment. This activity declined in the third quarter for the third time in a row and will shrink by 3 % for the whole year according to the KfW Investment Barometer. An improvement is not expected until the second half of the coming year when external economic factors strengthen again and stimulate German economic growth. However, this boost will not be enough to lift overall investment activity in 2013 into the positive range. KfW expects a decline in corporate investment of 2 % for 2013.

Currently corporate investment is marked by a decline of 1.4 % in the third quarter of 2012 compared to the previous quarter. In addition, the revisions by the German Federal Statistical Office show that investment decreased by 3.2 % in the second quarter instead of the expected 1.6 %. The most important component, investments in equipment (machinery, equipment, motor vehicles, etc), has declined by 7.3 % since the beginning of the year. Commercial construction (office buildings, factories) likewise shrank by 2.0 % during the same period.

Early indicators for next year, such as new orders for capital goods (currently 3.2 % above the previous quarter average), the Purchase Manager Index and the KfW-ifo SME barometer, are providing room for optimism. The global economy, particularly China and the US, will regain its footing and lead to a pick up in German exports. As soon as the capacity utilisation of the enterprises (currently only 81 %) again approaches its long-term average level (84 %), investment activity will also pick up steam. At the same time, interest rates are low, overall access to credit remains good and the energy turnaround is creating incentives for investment to increase energy efficiency.

"The German investment engine will restart in 2013", said Dr Jorg Zeuner, Chief Economist of KfW Bankengruppe. "Although we expect a decline of 2.0 % in corporate investment for 2013 overall, this fails to show the acceleration of investment activity in the second half of the year in the course of a global economic recovery. Our forecast for overall economic growth next year is considerably more optimistic. We expect GDP growth of 0.9 %, which will primarily be driven by private consumption and housing construction."