Germany is experiencing weak investment activity compared to other countries, both in the private and public sectors. According to a survey by KfW Research, corporate investment in Germany was 6.5% below the end-2019 level in the third quarter of 2024, while total private-sector investment was down by 8.3%. In contrast, the United States has seen a continuous growth in private-sector investment since an initial pandemic-related decline, with levels now approximately 14% higher than at the end of 2019. France and Japan have also shown stronger investment growth than Germany.
KfW CEO Stefan Wintels emphasized the importance of addressing this issue: “Private and public-sector investment is the key to competitiveness and growth. It is also an indispensable prerequisite for achieving the climate targets. Given the weak investment dynamic, we must act as a matter of urgency. KfW will fulfil its responsibility and effectively support businesses, households and municipalities in their projects even in difficult times.”
The survey highlights specific areas where Germany lags behind. Investment in plant and equipment was about 9% below pre-crisis levels by late 2024, while France saw an 8% decrease, contrasting with an 11.5% increase in the US and a slight rise across the EU. Investment in intellectual property grew by only 11.2% in Germany compared to a substantial increase of 36% in the US and nearly 27% in France.
Residential construction has also suffered a decline of around 13% since late 2019, similar to France's figures but lower than slight increases observed in both the US and EU markets.
Public-sector investment in Germany showed some positive movement, being up by 1.6%, yet it remains approximately 9% below where it would be if previous growth trends had continued from 2016 to 2019. The US public sector saw a significant increase of about 15%.
Business investments face challenges such as high energy costs, wage pressures, skilled labor shortages, regulatory hurdles, bureaucracy, legal requirements, tax burdens, funding difficulties, unfavorable financing conditions, and infrastructure issues.
Notably, two surveys identified "overall economic development" or "poor macroeconomic environment" as primary barriers to investment rather than typical locational criteria.