Fewer German Businesses to Increase Investments in 2015

        BERLIN--A growing number of German companies plan to scale back investment next year, a survey among nearly 3,000 companies showed Monday, dashing Chancellor Angela Merkel's hopes that more corporate spending will help stimulate the country's stagnating economy.
        Only three out of ten companies want to increase investments next year while one in four will spend less, according to a survey among 2,900 companies published by the business-funded IW economic institute. In their last poll in spring, 44% had planned to boost investment while only 15% wanted to cut spending this year.
        "The investment outlook deteriorated markedly since autumn last year and spring this year. Investment plans that have so far only been modest have been scaled back once again," said IW director Michael Huether according to prepared remarks. "A notable recovery of investment activity in Germany is still long in coming."
        The survey highlights Germany's chronically weak investment, which has been the main reason for the country's poor growth performance in the past six months. Latest data released Friday showed that Europe's largest economy narrowly escaped recession, growing by just 0.1% on quarter during the July-September period after a 0.1% contraction during the second quarter.
        Businesses' pessimistic outlook raises questions over whether Ms. Merkel's hopes that a recently pledged extra 10 billion euro ($12.52 billion) in public spending over three years starting in 2016 would really prompt additional investments worth EUR50 billion by the private sector, as forecast by the government.
        Carsten Brzeski, an economist with ING-Diba, said this forecast leverage is "wishful thinking" and more is needed to plug Germany's investment gap that has emerged over the past years.
        "The government's planned EUR10 billion in public investment is merely a drop in the bucket. It's a symbolic start," he said. "I suspect, the government's proposal came at a time when it wants to take the wind out of the international critics" sails."
        For months, Germany has been under pressure from the U.S., the International Monetary Fund and eurozone countries, such as France and Italy, to boost investment. Ms. Merkel had this investment plan to hand when meeting leaders of the Group of 20 nations in Brisbane, Australia, last weekend to discuss measures to lift global growth by 2.1% over five years through a mix of reforms and new infrastructure projects.
        But German companies' growing pessimism highlighted in IW's poll shows that poor returns and growth prospects at home remain a powerful disincentive to part with their cash.
        Businesses' overall economic outlook deteriorated with only 31% expecting their output to grow next year due to weak demand from the eurozone and the ongoing Ukraine crisis, according to IW. In spring, more than half of the companies polled by the institute expected their output to grow in 2014.
        As a result, the institute cut its growth forecast for Germany. It now predicts a 1.25% increase for this year and next, compared with a forecast of around 1.5% given previously for both years.
        Write to Andrea Thomas at andrea.thomas@wsj.com
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        (END) Dow Jones Newswires

        November 17, 2014 04:40 ET (09:40 GMT)